Exclusion of vending machine costs from syrup assessable value upheld by Tribunal. Appeal allowed.

The Tribunal held that the cost of cups, CO2 gas, and AMC charges of the vending machine should not be included in the assessable value of the syrup. The appeal was allowed, and the impugned order was set aside.

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Issues Involved:
1. Whether the value of CO2 gas, cups, and Annual Maintenance Charge (AMC) of vending machines are includible in the assessable value of syrup.
2. Marketability of the syrup by itself.
3. Applicability of extended period of limitation under Section 11A(1) of the Central Excise Act, 1944.
4. Validity of the Adjudicating Authority's reliance on Section 4(3)(d) of the Act and Rule 6 of the Central Excise Valuation Rules, 2000.

Detailed Analysis:

1. Inclusion of CO2 Gas, Cups, and AMC in Assessable Value:
The Tribunal found that the vending machine was obtained by the retail vendor first and thereafter the vendor purchased the syrup, carbon dioxide, and cups as per their requirement. The Adjudicating Authority failed to appreciate that it was the choice of the vendor whether or not to obtain the vending machine. The syrup, carbon dioxide, and cups were distinct and different commodities, and the vendor purchased them according to their requirements. The Commissioner erred in holding that the cups, carbon dioxide, and the vending machine were essential for the marketability or marketing of the syrup or promoted the sale of the syrup.

The Tribunal also noted that the Commissioner proceeded on a wholly erroneous construction of the agreement relating to supply of the vending machines to the retail vendors. The agreement provided terms and conditions for vending machines provided free of cost to the retail vendors and did not stipulate any condition for the sale of the syrup. The syrup's sale price was not enriched by the sale of other goods and services.

2. Marketability of Syrup:
The Tribunal found that the syrup manufactured by the appellant is specified in Chapter 21 of the Central Excise Tariff and was regularly sold by the appellant to the retail vendors. The Commissioner was wholly unjustified in judging the marketability of the syrup vis-à-vis the ultimate consumer of the aerated waters. The syrup was marketable goods and should be determined vis-à-vis the appellant’s customers and not the buyers’ customers.

3. Extended Period of Limitation:
The appellant argued that the syrup was manufactured and cleared from the factory in an identical manner for several years prior to the relevant period. The entire relevant facts relating to manufacturing activities were fully and truly disclosed to the Central Excise Authorities. There was no fraud, collusion, misstatement, or suppression of facts. The Tribunal found that none of the conditions precedent for invoking the longer period of limitation of 5 years as laid down in the proviso to Section 11A(1) exists or is satisfied in the present case.

4. Reliance on Section 4(3)(d) and Rule 6:
The Tribunal found that the Commissioner’s reliance on Section 4(3)(d) of the Act and Rule 6 of the Central Excise Valuation Rules, 2000, for including in the transaction value of the syrup the price separately charged for the cups and carbon dioxide and the maintenance charge of the vending machine was entirely misplaced. The separate consideration paid by the retail vendors for the purchase of the cups or carbon dioxide or for the maintenance service in respect of the vending machines was not by reason of or in connection with the sale of the syrup nor did such separate consideration represent any additional consideration for the sale of the syrup.

Conclusion:
The Tribunal concluded that there was no authority for the inclusion of the cost of cups, CO2 gas, and AMC charges of the vending/dispensing machine in the assessable value of the syrup. The appeal filed by the appellant was allowed with consequential relief, and the impugned order was set aside.

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