Supreme Court - Daily Orders
M/S Lakhanpal Ltd. vs Commr.,Central Excise ... on 3 September, 2015
Bench: A.K. Sikri, Rohinton Fali Nariman
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).4439/2006
M/S LAKHANPAL LTD. APPELLANT(S)
VERSUS
COMMR.CENTRAL EXCISE &CUSTOMS, VADODARA RESPONDENT(S)
O R D E R
First, facts in brief. The appellant is the assessee which is manufacturing torches, apart from other goods. These torches are manufactured and marketed under the brand name ‘NOVINO’. Indubitably, this brand name ‘NOVINO’ belongs to one M/s. Lakhanpal National Ltd. (hereinafter referred to as ‘LNL’) The said LNL has entered into an agreement with the assessee under which LNL has allowed the assessee to use the aforesaid brand name. For this purpose the assessee is also paying royalty @ 2.5% in respect of sales of the aforesaid products to buyers, other than LNL. Signature Not Verified Digitally signed by ASHWANI KUMAR In fact, approximately 50% of the sales of the Date: 2015.09.10 17:04:19 IST Reason: product ‘NOVINO’ manufactured by the assessee are sold to other buyers and approximately 50% 2 are sold to LNL.
The assessee received the show cause notice dated 02.10.1999 from the Commissioner of Central Excise in which it was mentioned that the assessee was paying royalty @ 2.5% for use of the brand name to LNL and the assessee was asked to show cause as to why the amount of royalty be not added to the price which was charged by the assessee in the sale of the aforesaid product, to arrive at transaction value. The show cause notice indicates that while proposing such a step, the Commissioner had relied upon Rule 5 of the Central Excise (Valuation) Rules, 1975.
The assessee questioned the veracity of this show cause notice taking number of pleas/contentions. However, none of these contentions found favour with the assessee. The Commissioner, who passed the Order-in-Original dated 02.08.2000, confirmed the demand made in the show cause notice. The appeal of the appellant preferred against that order before the Customs, Excise and Serice Tax Appellate Tribunal (hereinafter referred to as ‘CESTAT’) met the same fate as the Tribunal has also relied upon the order of the Commissioner thereby dismissing the appeal. The order of the 3 Tribunal is under challenge before us in these proceedings.
Submission is made by the learned counsel for the appellant that Rule 5 will have no application on the facts of the present case. It is submitted that a bare reading of Rule 5 would demonstrate that the additional consideration which flows directly or indirectly from buyer to the assessee can be added to the price which is charged by the seller from the buyer. On the contrary, in the present case, the royalty, which is treated as additional consideration is paid by the seller to the buyer. We find force in this contention of the learned counsel for the appellant which is clear from the bare reading of Rule 5. Rule 5 is re-produced herein below:
“Rule 5. Where the excisable goods are sold in the circumstances specified in clause(a) of sub-section (1) of Section 4 of the Act except that the price is not the sole consideration, the value of such goods shall be based on the aggregate of such price and the amount of the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee.” The very basis of the show cause notice, 4 in fact, was untenable and when the assessee is paying the royalty to LNL (buyer) and that too for using the brand name ‘NOVINO’ which belongs to the buyer, the question of treating the same as “additional consideration” within the meaning of Rule 5 and adding to the price charged from the LNL for sale of the aforesaid product could not arise.
The impunged orders are, therefore, set aside and the appeal is allowed.
................................J. [A.K. SIKRI] ................................J. [ROHINTON FALI NARIMAN] NEW DELHI;
SEPTEMBER 03, 2015
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ITEM NO.105 COURT NO.13 SECTION III
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
CIVIL APPEAL NO(S). 4439/2006
M/S LAKHANPAL LTD. Appellant(s)
VERSUS
COMMR.CENTRAL EXCISE &CUSTOMS,VADODARA Respondent(s)
(with appln. (s) for stay and interim relief) Date : 03/09/2015 This appeal was called on for hearing today. CORAM :
HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN For Appellant(s) Mr. Alok Yadav, Adv.
Mr. Somnath Shukla, Adv.
Mr. Udit Jain, Adv.
Mr. Praveen Kumar,Adv.
For Respondent(s) Mr. K Radhakrishnan, Sr. Adv.
Mr. Sanjai Kumar Pathak, Adv. Ms. Rashmi Malhotra, Adv.
Mr. Aviral Kashyap, Adv.
Mr. B. Krishna Prasad,Adv.
UPON hearing the counsel the Court made the following O R D E R The Civil Appeal is allowed in terms of the signed order.
Interlocutory application(s) pending, if any, are also disposed of.
(Ashwani Thakur) (Renu Diwan)
COURT MASTER COURT MASTER
(Signed order is placed on the file)