TaxTMI 
TaxTMI 
2006 (8) TMI 180
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....assified under Chapter 70 of the Central Excise Tariff Act, 1985 (in short 'Tariff Act'). There was a prolonged strike in the factory of the appellant in 1987, which according to the appellant resulted in closure of the appellant's factory and came to a standstill position so far production is concerned. The appellant, decided to cut down expenditure in areas like labour, packing, inventory, advertisement etc. M/s. Darshak Ltd. who was a bulk purchaser of the appellant's products started advertising to boost its sales in respect of glass and glassware purchased from the appellant. Inquiries were conducted by the Central Excise Authorities regarding expenditure on publicity and sales promotion incurred by M/s. Darshak Ltd. on the goods purchased from the appellant. Statements of some of the officials of M/s. Darshak Limited and Executive Director of the appellant were recorded during investigation. The appellant received show-cause notice dated 4-4-1991 from the Central Excise and Customs Directorate, Baroda proposing to recover duty amounting to Rs. 18,79,775.31 under proviso to Section 11A(l) of the Act. The notice was issued by the Collector, Central Excise and Customs, Baroda. T....
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.... and penalty of Rs. 10 lakhs under Rule 173Q(1) of the Rules was imposed. Land, buildings, plant and machinery belonging to the appellant was confiscated under Rule 173Q(2) of the Rules. However, option was given to pay fine of Rs. 2 lakhs in lieu of confiscation. 3. Appellant preferred appeal before the CEGAT. 4. It was the appellant's stand before the CEGAT that, there was no special relationship between the appellant and M/s. Darshak Ltd. The former was selling goods at the same price to other dealers also. Therefore, there was a factory gate price for the products and that was the assessable value under Section 4 of the Act. Reference was made to the assessee's own case in Commissioner of Central Excise, Vadodara v. Alembic Glass Industries Ltd. - 1996 (88) E.L.T. 296 in which CEGAT had given a categorical finding that M/s. Darshak Ltd. was not a favoured buyer as there was no evidence of discretion or favoured treatment. It was pointed out that admittedly the advertising expenses were incurred only by the customer M/s. Darshak Ltd. and up to the point of clearance, the appellant had not incurred any such expenditure. 5. The expenses incurred towards sales promotion an....
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.... information with the intention to evade payment of duty. Tribunal found that the circumstances under which M/s. Darshak Ltd. had given assurance of bulk purchase and commenced increased outlet advertising the appellant's product clearly indicated that it was a package deal for revival of the appellant's factory arrived at between them and M/s. Darshak Ltd., and was a part of the cost reduction exercise of the appellant. An application for rectification was filed which was dismissed. The appellant's argument in support of the rectification application was that the CEGAT did not consider the various judgments which were cited before it and there was no suppression of facts because the assessee had submitted its Balance Sheets and other documents. Stand of the Revenue that no case for rectification was accepted the rectification application was dismissed. 8. In support of the appeal, learned counsel for the appellants submitted that the methodology of working out assessable value has been highlighted by this Court in many cases. In Union of India v. Bombay Tyre International Ltd. [1984 (1) SCC 467], it was held that the value of an excisable article for the purpose of levying exci....
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....the Revenue. No material was placed by Revenue to justify this inferential presumption, which was also not spelt out in the show cause notice. 11. In Philips India Ltd. v. Collector of Central Excise, Pune [1997 (6) SCC 31], this Court noted as follows : "2. The learned counsel for the appellant drew attention to the judgment of a Division Bench of the High Court at Madras in Standard Electric Appliances v. Supdt. of Central Excise [(1986) 23 E.L.T. 302 (Mad)]. The Court said that it was common knowledge that when a consumer purchased The Court said that it was common knowledge that when a consumer purchased an article from a dealer, in the case of service facilities he looked to the dealer and not to the manufacturer. For replacement of defective parts also he looked to the dealer from whom he had purchased and, notwithstanding the fact that the wholesale dealer might ultimately have the parts replaced by it reimbursed from the manufacturer, the service facilities were provided by the wholesaler with a view to earn goodwill and attract customers. The advertising of a product by the wholesaler was one of the well-known methods by which the wholesaler attracted customers and i....
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....t was held the matters such as this, the Excise Authorities would do well to keep in mind the legitimate business considerations. 13. It is to be further noted that there is no material to show that there is no arrangement for reimbursement. The factual position shows that the transaction was on a principal to principal basis. The findings of this Court in A.K. Roy and Anr. v. Voltas Limited [1973 (3) SCC 503] also throw considerable light on the controversy. "20. There can be no doubt that the 'wholesale cash price' has to be ascertained only on the basis of transactions at arms length. If there is a special or favoured buyer to whom a special low price is charged because of extra-commercial considerations, c.g. because he is relative of the manufacturer, the price charged for those sales would not be the 'wholesale cash price' for levying excise under Section 4(a) of the Act. A sole distributor might or might not be a favoured buyer according as terms of the agreement with him are fair and reasonable and were arrived at on purely commercial basis. Once wholesale dealings at arms length are established, the determination of the wholesale cash price for the purpose of Section....