Commissioner Of Central Excise, Nagpur vs M/S. Candico (I) Ltd

Appeal No. E/1019/05 - Mum E/CO/327/05 (Arising out Order-in- Appeal No. SVS/63/NGP-I/2004 dated 27.12.2004 passed by the Commissioner of Central Excise (Appeals), Nagpur)

For approval and signature: Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S. S. Garg, Member (Judicial)

1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : Yes 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes

Commissioner of Central Excise, Nagpur Appellant

Vs.

M/s. Candico (I) Ltd. Respondent

Appearance:

Shri N.N. Prabhudesai, Supdt. (AR) for the appellant None for the respondent

Date of hearing : 31.08.2015 Date of decision : 07.09.2015

O R D E R No:..

Per: P.K. Jain:

The brief facts of the case are that the respondent is a manufacturer of confectionary items. They entered into a contract with Coca Cola (India) Ltd. By the said contract, Coca Cola (India) Ltd. was obliged to advertise their product along with their beverage Thumps-Up. For promoting sale of Thumps-Up, Coca Cola (India) Ltd. was to give one item of confectionary namely Drumbeat or Mint-o-fresh with each bottle. The advertisements were to be undertaken by the bottlers of Coca Cola (India) Ltd. Similarly, it was the bottler to Coca Cola (India) Ltd. who was to place orders directly to respondent and settle the account. It was observed that the price at which the confectionary items were being sold to bottlers of Coca Cola (India) Ltd./ or Coca Cola India Ltd. were in the range of 35% to 55% of the normal wholesale price of similar goods being sold to other wholesale dealers. Revenue therefore was of the view that the normal price of the goods at which these items are being sold to other customers should be taken and accordingly, two demand notices were issued; the first demand notice for August 1998 to December 1998 and the second show-cause notice from January 1999 to March 1999. The case was adjudicated by the Asst. Commissioner who dropped the demand. Aggrieved by the said order, revenue filed appeal before the first appellate authority who also dismissed the appeal filed by the revenue. Revenue has filed appeal against the said order of the Commissioner (Appeals). In the impugned order, the Commissioner (Appeals) has accepted the price on two grounds i.e. the industrial consumer is also a type of wholesale buyer and since they were buying the goods in huge quantity the value cannot be rejected. The other factor that weighed with the Commissioner (Appeals) packing of goods sold to Coca Cola (India) Ltd. was different and therefore the declared price should be accepted.

2. Ld. AR submitted a copy of the agreement with Coca Cola (India) Ltd. and the respondent to prove that it was obligatory on the part of the buyer to advertise and promote the respondents product. Ld. AR took us through agreement to support the contention that advertisement is a special type of promotion of the product and the buyer was obliged to advertise the product along with their own product i.e. Thumps-Up and this was an additional consideration, therefore the value declared cannot be taken as a normal wholesale price. As far as the quantity discount is concerned, ld. AR contends that the quantity discount cannot bring down prices to 35% to 55% charged to other wholesale dealer and respondent has not produced any quantity discount schedule to support the contention. In the absence of any quantity discount schedule, the difference in price cannot be considered due to quantity. It was further submitted that so called as different packing will not make any difference in prices. As can be seen from the details in the notice that all that was done is that the respondent had asked 24 items to be packed in each polybag as a crate of Thumps-Up contains 24 bottles. Putting 24 items of confectionary in a polybag cannot be considered as a different packing. Moreover, such a packing will not make difference in the price so as to bring the same to 1/3rd or half of the normal price. Further, respondent has not produced any cost data to support the saving due to different packaging. Ld. AR further submitted that Hon'ble Supreme Court in the case of CCE vs. Indorama Synthetics (I) Ltd. 2015-TIOL-190-SC-CX has held that any additional consideration is required to be added for arriving at the assessable value. He particularly emphasised para 17 and 19 of the said judgment to support his contention. Ld. AR further submitted that this Tribunal in the following two case laws has taken the view that advertisement and publicity charges are additional consideration and submitted that in view of the same the value needs to be added.

* CCE vs. R.Gac Electrodes P. Ltd. 1988 (33) ELT 485 * Killick Slotted Angles vs. CCE 1988 (35) ELT 647

3. None appeared on behalf of the respondent. However, a written submission was received wherein they have reiterated that prices are different due to the type of packing and manpower required on unit production. It was also submitted that no special concession was given to Coca Cola (India) Ltd. It was also submitted that expenditure on advertisement is for their own brand and cannot be added on the grounds produced by them. It was further submitted that the promotion scheme is called as Coca Cola Promotion with Mint-o-fresh cannot be called a promotion scheme for Mint-o-fresh and is a scheme for promotion in respect of Coca Cola alone. Respondent submitted following case law in support of the contention that the value declared must be accepted.

a) Chetan B. Thadani vs. UOI 1987 (30) 287 BOM

b) M/s. Brake India Ltd. 1998 (33) ELT 654

c) Standard Electric Appliances 1987 (23) ELT 302.

4. We have considered the submissions made by both sides. We find that the agreement entered between Coca Cola (India) Ltd. and the respondent that states as under:-

1. Promotion: CCI shall support the captioned promotion planned to be run by the authorised bottlers of the Coca Cola Co. in India. The broad concept of the promotion is one Mint-o-singles pack (1.6 gm) free to every consumer with purchase of 200/250/300 in Thumps-Up

2. Order Placement: Authorised bottler of Coca Cola Co. in India shall directly place orders on Candico (I) Ltd. and Candico shall deal directly with the bottlers on delivery, payment and other related issues.

 

4. Media : CCI shall advertise the Mint-o-singles pack in all its advertising for the promotion on TV and press. From the above agreement, it is very clear that Coca Cola (India) Ltd. was required to advertise the product of the respondent along with their own product. It was obligatory on the part of the buyer to advertise the respondents product in all advertising done by Coca Cola (India) Ltd. on television and press. We also have gone through the show-cause notice and we find that the price offered to Coca Cola (India) Ltd. are in the range 35% to 55% of the normal wholesale price. We also observe that the so called special packing is not very different. CCI have asked the respondent to pack specific number of confectionary items in every polybag. This is for bringing in line with their own system of packing i.e. cratewise. We do not find any specific details so as to indicate that the packing was very different and that would reduce the cost of the product to almost half to one third. We also find that the respondent has not been able to produce any quantity discount schedule so as to justify such low values due to higher quantity. Similarly, respondent has not been able to produce any costing data relating to packing so as to justify such lower values.

5. We have gone through the judgment of the Hon'ble Supreme Court in the case of Indorama Synthetics (supra) quoted by the ld. AR. We are in agreement with him that to advertise the product of the respondent along with their own product is an additional consideration. We have also gone through the judgment in the case of R.Gac Electrodes P. Ltd. (supra) and are of the view that the case supports the contention of Revenue. The details of exact money spent on advertisement/publicity is not known. It may not be practically possible to ascertain the same. The case pertains to the old Section 4 when the concept of the normal wholesale price existed. In the present case, normal wholesale price is known. In the facts and circumstances of the case, we are of the considered view that the assessable value of the goods will be the normal wholesale price.

6. At the outset, we have also gone through the judgments quoted by the respondent. We find these judgments are in different situation wherein wholesale dealer was advertising the manufacturers product in order to increase his own wholesale business and in those circumstances, the Tribunal and other courts have taken the view that the expenditure incurred on advertisement by the dealers cannot be added to the assessable value of goods manufactured.

7. In the result, appeal filed by the revenue is allowed.

(Pronounced in Court on .)

(S. S. Garg) (P.K. Jain) Member (Judicial) Member (Technical)

//SR

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