of Central Excise, Meerut-I. Vs. Bisleri International
Private Limited  Insc 371 (27 July 2005)
Singh & S.H. Kapadia
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.
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 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.).
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.
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.
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.
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.
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 Central Excise v. Indian Oxygen Ltd. reported in 1988 (36) ELT
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.
Commissioner accepted the submissions of the assessee and dropped the duty
demand contained in the show cause notice.
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.
circumstances, the adjudicating authority came to the conclusion that the
department had erred in invoking rule 5.
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.
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.
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 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).
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.
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 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.
short question which arises for determination in the present case is 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 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.
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).
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