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TMI Blog2002 (1) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Section 11AC of Central Excise Act, 1944 read with Rule 173Q. 2.Personal Penalties, as detailed below, have been imposed on the other seven persons including the three captioned appellants being Sl. Nos. 3 to 5, under the provisions of Rule 209A of the Central Excise Rules, 1944 :- Names of the Persons Penalties imposed (1) Smt. Pravadevi Goenka(appellant herein) Rs. 1.00 lakh;(Rupees one lakh); (2) Shri S.K. Goenka(appellant herein) Rs. 10.00 lakh;(Rupees ten lakh); (3) Shri G.P. Singh(appellant herein) Rs. 25,000.00;(Rupees twenty-five thousand) 2A.Briefly stated the facts of the case are as under :- M/s. Tripty Drinks Pvt. Ltd. are the manufacturer of Aerated Waters classifiable under Chapter 22 of the Central Excise Tariff Act, 1985. The said product was chargeable to specific rate of duty prior to March, 1994 and was made chargeable to ad valorem rate of duty with effect from 1-3-94. Accordingly, the appellant company filed the price declarations with their jurisdictional Central Excise Authorities and based upon such declarations, cleared the Aerated Waters on payment of duty. On a doubt being entertained by the Revenue as regards the correctness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he wholesale dealers themselves. We make it clear that there is no dispute about the legal position that the freight expenses, even if are higher than the actual freight undertaken by a manufacturer, such differential amount cannot be added to the assessable value. But if there are evidences to show that the cost of the excisable product was diverted towards the transportation charges and as such the assessable value of the product was suppressed by showing a recovery of a portion of the price of the goods as transportation charges, the same will result in suppression of the assessable value and have to be added to the same. 3.3As regards the evidences to reflect upon the above position, the Commissioner has referred to the statements of Shri Chittaranjan Bhanjadeo and of Shri Debendra Kumar Bardhan. Whereas Shri Bardhan is a Cashier of M/s. Tripty Drinks, Shri Bhanjadeo is a Cashier of another company, M/s. Sreeram Drinks who is also engaged in the manufacture of Aerated Waters. The facts on record revealed that though he has been employed by M/s. Sreeram Drinks as their Cashier, but he was also working as a Cashier for both the Companies including M/s. Tripty Drinks, and was col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn cost from Jagatpur to Jaipur, the said company was charging/taking Rs. 6.50 (Rupees six and fifty paise) per crate towards transportation charges against which they have never given any Bill/Receipt to me. On being asked about the receipt of this Rs. 6.50, the factory manager, Mr. P.K. Kuila informed me that this Rs. 6.50 relates to transportation. He further said that the actual transportation is Rs. 14.00 and you have been allotted Rs. 7.50 (including Octroi Tax) to spend at your end and the balance Rs. 6.50 will have to be deposited with the Cashier per crate on your each lifting. Since we bear the entire cost of transportation from Jagatpur to Jaipur and thereafter to the retailers, there is no reason for such deposits with the company. However, we pay it as per their insists..." It is seen that the veracity of the above statement of Shri Sahoo gets confirmed and fully corroborated by the statement of Shri Bhanjadeo and from the transportation charges collected by the appellant company at the rate of Rs. 6.50 in Jaipur. 3.4Similarly, the statements of Shri Fakir Charan Sahoo, Proprietor of M/s. Smita Cold Drinks, Kalapathar, is to the effect that though he used to carry th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and are not taking the transportation either in the vehicle arranged by them on their own or in the vehicles provided by the manufacturers under the hire purchase agreement, there is no justification for the appellants to collect the extra amount from their buyers on account of transportation. Such collections have rightly been held to be additional consideration for sale of the goods, which flowed back from the wholesale dealers to the appellant company and have been rightly included in the assessable value for the purposes of determination of Central Excise duty. Learned Advocates have referred to the Hon'ble Supreme Court's decision in the case of Indian Oxygen Ltd. - 1988 (36) E.L.T. 723 (S.C.) and Baroda Electric Meter Ltd. reported in - 1997 (94) E.L.T. 13 (S.C.) as also to other decisions of the Tribunal on the point i.e. extra realisation on account of transportation charges that the actual amount incurred, will not form part of the assessable value. As already observed, there is no dispute about the above legal position. The question which arises is as to whether recovery of more amount on account of transportation than the actually incurred cost is profit made out of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wholesale dealers were being issued by the employees of M/s. Tripty Drinks and not of M/s. Kanu Carriers. The documents being issued on behalf of M/s. Kanu Carriers are signed by the managers of M/s. Tripty Drinks. In fact, M/s. Kanu Carriers have no identity of its own. All the transportation activities are being actually undertaken by M/s. Tripty Drinks. Cost of the actual transportation is paid by the wholesale dealers immediately to the driver of the vehicle and bills are subsequently raised at the higher value. The difference between the bill raised and the freight paid to the driver, has been held to be additional consideration towards the cost of the goods received by M/s. Tripty Drinks, by holding M/s. Kanu Carriers as a bogus and fictitious unit. 3.10It is on record in the shape of the statements of the various persons that the bills were actually being raised by M/s. Tripty Drinks on behalf of M/s. Kanu Carriers. The adjudicating authority has observed that the real objective behind the creation of M/s. Kanu Carriers was to project it as a unit providing transportation services at the factory gate to the wholesale dealers. But actually, the entire destination-wise ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the advertisement charges collected by them from wholesale dealers on account of one M/s. Mataji Trading Company. It is seen that the said Mataji Trading Company is created by the appellant company with effect from March, 1994 when the Aerated Waters were charged to adv. rate of duty. Prior to the said period, the Aerated Waters were attracted to excise duty on specific rates. At that point of time, the advertisement was being undertaken by the appellants themselves. It may also be noted here that subsequently when the Aerated Waters again became chargeable to specific rate of duty with effect from November, 1995, the collections on account of advertisement charges were shown as having been made by the noticee company. Admittedly, as per the law laid down by the Honourable Supreme Court, the advertisement expenses undertaken by a manufacturer have to be added to the assessable value of excisable product since it enhances the marketability of the product. However, the contention of the appellant company is that such advertisement activities were being undertaken by M/s. Mataji Trading Company under an agreement with the wholesale dealers and the advertisement was being done on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd at the rate of Rs. 10.00 per crate from 1-8-95 to 31-10-95. The said amounts were required to be paid compulsorily by the wholesale dealers at the time of lifting of Aerated Waters from the appellant company. This has been made clear by the various wholesale dealers in their statements. Shri Sanjaya Kumar Agarwal of M/s. Supreme Distributors, Sambalpur has deposed in his statement that the advertisement charges were being collected by the manufacturer. To the same effect is the statement of Shri Suraj Kumar Agarwal that advertisement charges were being paid by them to the manufacturer only and there is no advertising agency which has entered into any sort of agreement with them for advertising the product. Shri Karunakar Sahoo of Jageswar has also clearly deposed that advertisement is not done by them and the entire advertisement expenses were being borne by the company. As such, it becomes clear that advertisement was being undertaken by M/s. Tripty Drinks, for which a portion of the price of the Aerated Waters was being shown to have been collected by them from the wholesale dealers. However, the wholesale dealers did not have any choice to refuse the payment of the said adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed at Rs. 7.75 per crate. With effect from 1-8-95 when M/s. Tripty Drinks increased the retail price per crate, the cost of advertisement was also increased to Rs. 10.00 per crate. This establishes a clear nexus between the advertisement charge and the cost of the Aerated Waters. Otherwise, with the increase of the price of the Aerated Waters, the cost of advertisement expenses would not have gone up with effect from the same date. As such, we are of the view that the adjudicating authority has rightly held that such, advertisement charges recovered by the appellants are to become a part of the assessable value as per the provisions of Section 4. 3.16It has also been argued by Shri K.K. Anand, learned Advocate that the demand is hit by the bar of limitation. However, on being questioned, he fairly agrees that the assessments were provisional, and submits that earlier the matter was remanded by the Tribunal to the Assistant Commissioner for passing a speaking order, taking into account the submissions filed by the appellant company. The Tribunal in that Order dated 9-8-95 observed that the action of the Assistant Commissioner in passing a provisional Order on 20-2-95, after having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules, 1944, it has been argued by Shri K.K. Anand, learned Advocate that provisions of Section 11AC are not attracted inasmuch as the period involved in the appeal is from 1-3-94 to 31-10-95 when the said Section was not in force. As such, by referring to the various judgments, he has pleaded that the said Section 11AC cannot have any retrospective effect. We agree with the above contention of the learned Advocate. It is well-settled that Section 11AC having been enacted with effect from 28-9-96 cannot be made applicable for the period prior to the date of enactment. However, it is seen that the penalty has also been imposed under the provisions of Rule 173Q of Central Excise Rules, 1944. Having held that M/s. Tripty Drinks Pvt. Ltd. indulged into under-valuation of their product by realising the cost of Aerated Waters under the garb of transportation and advertisement charges, they are liable to penal action. However, keeping in view the facts and circumstances of the case, we reduce the quantum of penalty to Rs. 35.00 lakh (Rupees thirty-five lakh). 3.19As regards the penalty of Rs. 10.00 lakh (Rupees ten lakh) imposed on Shri S.K. Goenka in terms of the provisions of Rule 209 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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