TaxTMI 
TaxTMI 
TaxTMI 
1990 (9) TMI 176
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....ment dated 24th July, 1980 on 10th November, 1982. They were granted L-4 licence. The appellants also applied claiming benefit of Notification No. 120/75 which was granted on 23rd December, 1982. Again the appellants filed copies of agreement dated 24th July, 1980 and 1st July, 1985 on 23rd July, 1985. The respondent, though there were distributorship agreements, granted the permission to avail the benefit of Notification No. 120/75. 3. While so, on 30th June, 1987, the Collector issued a show-cause notice demanding differential duty of Rs.................. under the proviso to Section 11A. The allegation in the show cause notice is that the appellants has contravened the conditions of Notification No. 120/75 by selling its entire production to the buyer and also allowing discount of 26 to 30%, and as per clauses 2.01 to 2.10 of the agreement, the buyer undertook the responsibility, including sales promotion, market survey, employment of technical personnel, preparation of sale forecasts etc. to promote marketability of the goods and thus the discount was given to cover these expenses by the buyer. It was also alleged that 16% of the discount allowed to the sole-distributor flowed....
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....ential duty liability. 8. Challenging the above order the appellants raised the following contentions :- (i) that the agreement of distributorship is an agreement for sale on principle to principle basis, (ii) that show-cause notice is barred by limitation, (iii) and that the finding that 14% of the expenses incurred by the buyer towards advertisement and other sales expenses in respect of goods purchased from the appellants is perverse, as such expenses have no relevance to the value of goods sold by the appellants ex-factory as the demand solely relates to the price as so determined for such sales ex-factory and nothing more. 9. Elaborating the agreements Shri Hidayuttalah submitted that the word 'under-take' appearing in clause 2 of the agreement as well as the so-called obligation has to be interpreted in the context of, inter alia, following :- (i) Several clauses provide for decision to be made by the distributor at their sole discretion/opinion. The substantive clauses in effect and substance do not impose any obligation or undertaking because the distribution decision cannot be challenged or enforced in a suit for specific performance. (ii) The appellants' sale form ....
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....the agreement and after considering the agreement only they have permitted the appellants to clear the goods under the Notification No. 120/75. When the appellants applied for the grant of extra gate-pass in favour of the buyer the Asstt. Collector granted the same on 16th March, 1983 which shows that the department was well aware of the fact that the appellants were selling entire production to the buyer. On 23rd July, 1985 the appellants brought to the notice of the department the agreement dated 24th July, 1980 and also the agreement dated 1st July, 1985. In spite of these agreements which were in the knowledge of the department the department permitted the appellants to clear the goods under the Notification No. 120/75. In the month of April, 1985 the department classified the Switches under T.I.61, therefore, the appellants had to file a classification list ........... not entitled to avail the benefit of Notification 120/75 in respect of switches. While filing the classification list from April 1st, 1985 to 14th September, 1985 the appellants claimed deduction of 30% discount which was approved by the department. Subsequently, after issuance of Trade Notice No. 46/86 dated 13....
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....h sale plus the actual cost of carriage, loading, freight, insurance, local taxes and other charges incurred. 4.01 The Manufacturers shall allow a discount of 30% to the Distributors calculated on their list selling prices as fixed in accordance with Clause 3.03 above but the rate of discount may be revised or altered from time to time by mutual agreement. 5. ADVERTISEMENTS : The advertisement and sales promotion budget and media shall be determined by Distributors. Distributors shall alone be responsible for carrying out the advertisement campaign and shall bear the cost of such advertisement. The Distributors shall further be responsible for designing and producing adequate sales literature the cost of which will be borne by the Distributors entirely. The Distributors shall not include in such advertisement and/or other sales promotional media any technical data without the same being approved in consultation with the Manufacturers prior to its publication. The Manufacturers shall not withhold their approval on such technical data unreasonably. 7. PLACING OF THE ORDERS : Distributors shall place orders with the Manufacturers from time to time for their requirement of the sa....
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....that these activities are carried on, on behalf of the manufacturer and part of the expenses incurred on account of these activities cannot be included in the assessable value of the appellants. Therefore, we direct the Collector to call for the relevant purchase orders and the contract of sale and the relevant price-lists and examine whether the sale to the buyer is an out and out sale. If it is so, the expenditure incurred on account of the activities mentioned in clauses 2.01 to 2.10 are not to be included in the assessable value of the appellants. We may also point out that by an advertisement a wholeseller attracts the customers and if as a result of increasing his business the demand for the product of manufacturer also increases, the advertising by the wholeseller cannot be said on behalf of the manufacturer [Standard Electric Appliances v. Suptd. C. Ex., reported in 1986 (23) E.L.T. page 302 Madras]. 15. The next question to be considered is whether the show cause notice is barred by limitation. 16. We have also extracted the allegation made in the show cause notice in the above paragraphs. The crux of the matter is that the appellants suppressed the fact of selling the e....