Customs, Excise and Gold Tribunal - Delhi
Pepsi Foods Ltd. vs Commissioner Of Central Excise on 15 December, 1998
ORDER A.C.C. Unni, Member (J)
1. The appellants are engaged in the manufacture of soft drink concentrates which were earlier classified under Chapter Heading 33.02 of the Central Excise Tariff Act and subsequently under Chapter 21. They are also owners of the brand name "Lehar". They sell the concentrates to bottlers under Franchise agreement which permits the bottlers to produce soft drinks out of concentrates purchased from the appellants sell the same in an agreed area under the brand name of the appellants. The appellants, apart from the price of the concentrate, also received royalty at the rate of 2.75% of the maximum retail price of each beverage bottle cleared by the bottlers from their plant. The appellants also carry on advertisement and sales promotion activity and as per agreement, the bottlers are also called upon to carry on the advertisement and sales promotion activity for the beverages. The appellants submitted price lists for the period 1-4-93 to 31-3-95 in which they did not include the royalty charges and also did not indicate the fact of advertisement and sales promotion activity carried on by them or their bottlers. The price lists were provisionally approved by the Asstt. Collector. Subsequently show cause notices were issued to the appellants to explain why the prices should not include the royalty amounts, the sales promotion and advertisement costs and why the duties short-levied on this count should not be recovered from them. After adjudication, the Asstt. Collector passed the Order-in-Original approving the price list finally holding that the franchise agreement between the appellants and the bottlers made it obligatory on the bottlers the purchase of appellant's concentrate for using the brand name 'Lehar' and the royalty charges therefore, were in the nature of a return for the sale of the concentrate than of the brand name. As regards advertisement and sales promotion costs, Asstt. Collector observed that these activities promoted the marketability of the appellant's product and following the Supreme Court decision in the case of Bombay Tyre International, he held that these costs were loadable to the prices of the concentrate. In Appeal, the Commissioner (Appeals) relying on the Tribunal decision in their own case (Final Order No. 536/95-A) [1996 (82) E.L.T. 33 (Tri.)] held that royalty charges except in respect of soda bottles (where there was no concomitant sale of concentrate) would be includible in the assessable value. As regards advertisement and sales promotion costs, which the Department had failed to link with a promotion of marketability of the concentrate, he held that these could not be added to the assessable value of the concentrate. The case was, therefore, remanded to the Asstt. Collector for de novo consideration of the matter in the light of the Tribunal decision in Final Order No. 536/95-A.
2. Shri V. Sridharan, Ld. Advocate appearing for the appellants fairly concedes that the matter is covered by the Tribunal decision referred to by the Commissioner (Appeals) and reported in 1996 (82) E.L.T. 33 (Tri.). The majority judgment in the said case held that advertisement expenses incurred by the appellants for soft drink product manufactured by bottlers and not for their final product namely, soft drink concentrate will not be includible in the assessable value of the concentrates manufactured by the appellants. As regards royalty charges for use of brand name by the bottlers on the beverage products manufactured by them from the concentrates purchase from the appellants, being an extra accrual over and above price collected for the sale of concentrate, would be includible in the assessable value of concentrates.
3. The prayer of the appellants in the present Appeal is for setting aside the portion of the impugned order in Appeal relating to the issue of includibility of royalty charges in the assessable value.
4. Shri K. Shiv Kumar, Ld. JDR appeared for the Department and reiterated the findings of the Collector (Appeals).
5. Following the Tribunal decision in the appellant's own case reported in 1996 (82) E.L.T. 33, we find no merit in the present Appeal and the Appeal is accordingly rejected.