TaxTMI 
TaxTMI 
2008 (12) TMI 547
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.... for M/s. Tata -BP Lubricants India Pvt. Ltd. and were paying duty on the basis of cost of raw materials plus job charges basis as per the law laid down by the Supreme Court in the case of Ujjagar Prints - 1988 (38) E.L.T. 535 (S.C.). However, M/s. Nandan Petrochem Ltd., while working out the cost of production were not including the cost of gift articles viz. gold/silver coins, sunglasses and watches which were provided by M/s. Tata -BP and were required to be put inside the containers of the lubricating oil or by attaching the gifts with the lubricating oil container before clearance from the factory gate. For this purpose, they were issued a show cause notice stating that they were required to add value of free gifts supplied along with ....
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....y evaded and cannot be reduced as has been done by the Commissioner (Appeals). 3. Shri Haren Gandhi appeared on behalf of the assessee and submitted that in this case the duty has been paid as per the law declared by the Apex Court in the case of Ujjagar Prints (cited supra), wherein the duty was required to be paid on the cost of raw material and job charges. The gift articles were meant for free distribution and were not used in the process of manufacture nor were required to be used for manufacture. They were simply to be put inside the container or packed along with lubricants and since it did not form part of the final product, the question of its inclusion in the sale price does not arise. In support thereof he referred to the....
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....on that basis provided that the declaration as to the price at which he would be selling the processed goods in the market, would include only the price or deemed price at which the processed fabric would leave the processor's factory plus his profit. Ride 174 of the Central Excise Rules, 1944 enjoins that when goods owned by one person are manufactured by another the information is required relating to the price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharge all the liabilities under the said Act and the rules made thereunder. The price at which he is selling the goods must be the value of the grey-cloth or fabric plus the value of the job work done plus the manufacturing profit an....
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....o sales promotion whose cost was not required to be deducted from the assessable value. A similar view was taken in the case of Geoffrey Manners and Co. Ltd. - 2001 (138) E.L.T. 1418 (Tri.-Mumbai) where it was held that gifts of articles other than those manufactured by assessee are sale promotion incentives and not trade discounts. Similarly in the case of Baljeevan Karyalaya - 2000 (117) E.L.T. 393 (Tribunal), it was held that gift items given in cash or in kind as incentive for sales promotion to dealers not to be treated as trade discount. Value of gifts includable in the assessable value. It was further held that the appellants has deliberately, willfully and illegally deducted the value of gifts from assessable value and therefore imp....
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....essable value. 5. As regards revenue's appeal it was submitted that there was a clear mis-declaration as the complete value was not declared and the fact of putting free gifts in the lubricating container was never disclosed to the department. Once the Ujjagar Prints case and Board's instructions from time to time clarified that the complete cost of raw material is to be included and Supreme Court in its clarificatory order has stated that only trade profit is required to be excluded, the cost of gifts should have been included by the assessee. Attention was also invited to the provisions of Rule 173C which required that in case where the goods are not sold, a price declaration was required to be filed declaring the value of goods u....
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....ts as incentive for sales promotion and is therefore an item of sale expenses, whose cost is required to be included in the cost of production as the Central Excise duty is chargeable on the price at which the goods are sold. Once it is an element of expenses, its cost has to be included in the cost of production whether supplied by M/s. Tata -BP or otherwise. The assessees were incurring extra labour charges for putting the coins in the container or packing the gifts along with the container which form part of the job charges, but they did not include the cost of free gifts. The Apex Court has also in it its clarificatory order held that duty is required to be paid at the price at which the trader sells the goods provided that the same doe....