Full Judgment Text
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CASE NO.:
Appeal (civil) 772 of 2001
PETITIONER:
Commissioner of Central Excise,Meerut-I.
RESPONDENT:
Bisleri International Private Limited
DATE OF JUDGMENT: 27/07/2005
BENCH:
B.P. SINGH & S.H. KAPADIA
JUDGMENT:
J U D G M E N T
WITH
C.A. Nos.769, 770 771 & 1403-1404 OF 2001,
C.A. No.6765 OF 2002, C.A. Nos.120, 1763 &
5215-5219 OF 2004 AND C.A. No.672 OF 2005.
KAPADIA, J.
A short question which arises for determination in these
appeals filed by the department under Section 35-L (b) of the
Central Excise Act, 1944 (for short "the said Act") is \026 whether
the assessee had undervalued the aerated water by excluding
two items, namely, the amounts received under credit notes as
price support incentive and rent on containers (ROC) from the
assessable value?
For the sake of convenience, we mention hereinbelow the
facts in civil appeal no.772 of 2001, in the case of
Commissioner of Central Excise, Meerut-I v. Bisleri
International Private Limited (formerly known as M/s Coolade
Beverages Ltd.).
M/s. Coolade Beverages Ltd. (hereinafter referred to as
"the assessee") were manufacturers of aerated waters. The
manufacturing activity of the assessee basically consisted of
bottling. The assessee obtained the concentrate (raw-material)
for aerated water from a subsidiary of Coca Cola Corporation.
The name of that subsidiary was M/s Britco Food Company
Ltd. (hereinafter referred to as "M/s Britco"). The assessee
sold the bottled aerated water to the wholesale dealers.
The department found that the assessee used to collect
from some wholesale dealers ROC @ Rs.7.50 per crate. The
department further found that the assessee used to receive price
support incentives in the form of credit notes from M/s Britco.
Accordingly, the department issued show-cause notice
contending that the cost of ROC and the value of price support
incentive were liable to be included in the assessable value in
terms of rule 5 of the Central Excise (Valuation) Rules, 1975.
The assessee contested the show-cause notice. The assessee
submitted that the ROC had no relation to the value of the
aerated water; that the leasing of the bottles was a separate
activity which had no connection with the manufacture of
aerated water and, therefore, realizations from such ancillary
activity were not includible in the assessable value of the
aerated water. In this connection, the assessee placed reliance
on the judgment of this Court in the case of Collector of
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Central Excise v. Indian Oxygen Ltd. reported in 1988 (36)
ELT 730.
With regard to the amounts received as price support
incentive from M/s Britco, the assessee contended that the said
payment was immaterial to the wholesale price of the aerated
water; that the sale to the wholesale dealers was on principal to
principal basis and that the wholesale price was the sole
consideration. Therefore, the sale price constituted the ’normal
price’ under section 4(1)(a) of the said Act and that rule 5 of the
said Rules, 1975 had no application to the facts of the present
case.
The Commissioner accepted the submissions of the
assessee and dropped the duty demand contained in the show
cause notice.
So far as the price support incentive was concerned, the
Commissioner held that the credit notes were not received from
the buyers of aerated water; that they were received from M/s
Britco (supplier of concentrate); that the credit notes were
received from M/s Britco on account of reduction in the price of
the concentrates and, therefore, the question of including the
amount received under such credit notes in the assessable value
did not arise. The commissioner further held that no additional
consideration had flown directly from the buyers of aerated
water and, therefore, rule 5 was not applicable to the facts of the
present case. The commissioner further found that the benefit
of reduction in prices of concentrates was in fact passed on by
the assessee to the buyers in the form of reduced sale price of
the aerated waters; that, with effect from 12.9.1994, the sale
price of aerated water was reduced by Rs.27/- per crate i.e. from
Rs.108/- per crate to Rs.81/- per crate whereas the gain to the
assessee from the credit notes was only Rs.1.66 per crate and,
therefore, there was no additional consideration flowing back to
the assessee from their buyers. The commissioner further
found that with effect from 12.9.1994, the assessable value
went up from Rs.46/- per crate to Rs.52/- per crate. The
commissioner further found that the consumers were benefited
on account of acute competition between Coca Cola and Pepsi.
In the circumstances, the adjudicating authority came to the
conclusion that the department had erred in invoking rule 5.
On the question of ROC, the commissioner came to the
conclusion that the facts of the present case were similar to the
facts in the case of Collector of Central Excise v. Indian
Oxygen (supra). The commissioner found that in the present
case also, the ROC was related to an ancillary activity; that the
said ROC had no connection with the manufacture of aerated
water and, therefore, ROC was not includible in its assessable
value.
Aggrieved by the aforesaid decision, the department went
in appeal to the Customs, Excise & Gold (Control) Appellate
Tribunal (hereinafter referred to as "the Tribunal"). By
impugned decision, the tribunal confirmed the order of the
adjudicating authority (commissioner). Hence, this civil
appeal.
Mr. Rajiv Datta, learned senior counsel appearing on
behalf of the department submitted that the assessee had
reduced their wholesale price on instructions of M/s Coca Cola
Company in order to lower the incidence of excise duty; that
this reduction in price of aerated water was compensated by
issuance of credit notes by M/s Britco (subsidiary of M/s Coca
Cola Company); that the giving of price support incentive by
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M/s Britco to the assessee constituted additional consideration
which in turn depressed the prices of aerated water and,
therefore, the entire arrangement was entered into in order to
lower the incidence of excise duty. It was further submitted
that M/s Britco the manufacturer of concentrates (raw-material)
had nothing to do with the marketing activity of the
assessee. It was urged that M/s Britco was a medium to flow
back the additional consideration to the assessee. It was urged
that but for the credit notes issued by M/s Britco, the assessee
was required to increase the assessable value and the sale price
of aerated water. It was submitted that with the reduction of the
prices of aerated water, the sales had increased which was
directly relatable to the reduction in prices. It was submitted
that the price support incentive was given by M/s Britco to the
assessee in order to make good the loss sustained by the
assessee in making the price of aerated water competitive. It
was submitted that receipt of price support by the assessee was
enough evidence to justify that the normal price was more than
the price actually charged to the buyer. Learned counsel further
submitted that the prices of the product were lowered on
account of incentive received by the assessee from M/s Britco
(supplier of the raw-material).
At the outset, it may be mentioned that under section
4(1)(a), "value" in relation to any excisable goods is a function
of the price. In other words, "value" is derived from the normal
price at the factory gate charged to an unrelated person on
wholesale basis and at the time and place of removal.
It is for the department to examine the entire evidence on
record in order to determine whether the transaction is one
prompted by extra-commercial considerations. It is well settled
that under section 4 of the said Act, as it stood at the material
time, price is adopted as a measure or a yardstick for assessing
the tax. The said measure or yardstick is not conclusive of the
nature of the tax. Under section 4, price and sale are related
concepts. The "value" of the excisable article has to be
computed with reference to the price charged by the
manufacturer, the computation being made in accordance with
section 4. In every case, it will be for the revenue to determine
on evidence \026 whether the transaction is one where extra-
commercial considerations have entered and, if so, what should
be the price to be taken into account as the value of the
excisable article for the purpose of excise duty. These
principles have been laid down in the judgment of this Court in
the case of Union of India & Others v. Bombay Tyre
International Ltd. etc. reported in AIR 1984 SC 420.
The short question which arises for determination in the
present case is \026 whether the department has been able to show
that the intrinsic price of aerated water was more than the price
actually charged to the buyer? According to the department,
the actual price was lower on account of incentives given by
M/s Britco, the supplier of concentrates to the assessee. As
found by the adjudicating authority as well as by the tribunal,
the prices had to be reduced by the assessee on account of
competition in the market. Further, the prices stood reduced on
account of concession given by M/s Britco, supplier of
concentrates (raw-material), to the assessee. There is no
evidence of flow back of any additional consideration from the
buyers of aerated water (beverage) to the assessee. On account
of cut throat competition from Pepsi, M/s Britco had to provide
incentive to the assessee. But for the incentive from the
supplier of concentrates (raw material), the assessee was not in
a position to face acute competition from Pepsi. On the other
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hand, the evidence on record indicates that price uniformity was
maintained. No favour for extra commercial reasons was
shown to any of the buyers of aerated water. There is no
evidence of any concession to any of the buyers. There is no
evidence of existence of any favoured buyers. In the
circumstances, rule 5 is not applicable.
So far as ROC is concerned, the commissioner found that
the rent equivalent to interest was collected by the assessee on
account of delay in returning of empty crates/bottles. The
purpose of charging interest was to get back empty
bottles/crates immediately as otherwise the assessee was
required to make additional investment towards stock inventory
on crates/empty bottles. Further, the said levy did not form the
price of the aerated water and, therefore, ROC was not
includible in the assessable value. In the circumstances, the
commissioner was right in applying the ratio of the judgment of
this Court in the case of Collector of Central Excise v. Indian
Oxygen (supra).
For the aforestated reasons, there is no merit in these
appeals preferred by the department. Accordingly, all the
appeals are dismissed with no order as to costs.