By TIOL News Service

MUMBAI, SEPT 16, 2015. THE respondent, a manufacturer of confectionery items, entered into a contract with Coca Cola (India) Ltd. By the said contract, Coca Cola (India) Ltd. was obliged to advertise the confectionery along with their beverage ‘Thums-up'. Coca Cola (India) Ltd. was to give one item of confectionary namely Drumbeat or Mint-o-fresh with each bottle. The advertisements were to be undertaken by the bottlers of Coca Cola (India) Ltd. Similarly, it was the bottler to Coca Cola (India) Ltd. who was to place orders directly to respondent and settle the account.

Revenue observed that the price at which the confectionery items were being sold to bottlers of Coca Cola (India) Ltd. were in the range of 35% to 55% of the normal wholesale price of similar goods being sold to other wholesale dealers.

SCNs were issued demanding differential duty by adopting the normal price of the goods at which the goods were sold to other customers. The period in question is August 1998 to December 1998 &January 1999 to March 1999.

The demands were dropped by the AC, CEX and the Revenue appeal was dismissed by the Commissioner(A). While doing so, the appellate authority took the following view - the industrial consumer is also a type of wholesale buyer and since they were buying the goods in huge quantity the value cannot be rejected; packing of goods sold to Coca Cola (India) Ltd. was different and, therefore, the declared price should be accepted.

With a never-say-die attitude, Revenue took their battle to the Tribunal.

The AR referred to the agreement and inter alia submitted that it was obligatory on the part of the buyer (Coca Cola) to advertise and promote the respondent's product and this being the additional consideration, the value declared cannot be taken as a normal wholesale price. Reliance is also placed on the apex court decision in Indorama Synthetics (I) Ltd. 2015-TIOL-190-SC-CX where it is held that advertisement and publicity charges are additional consideration & the same is required to be added for arriving at the assessable value.

The respondents in their written submission mentioned that prices are different due to the type of packing and manpower required on unit production; that expenditure on advertisement is for their own (Coca Cola) brand and cannot be added on the goods produced by them; that the promotion scheme is called as “Coca Cola Promotion with Mint-o-fresh” and cannot be called a promotion scheme for Mint-o-fresh.

The Bench extracted the agreement entered between Coca Cola (India) Ltd. and the respondent, clause 4 of which reads -

4. Media: CCI shall advertise the Mint-o-singles pack in all its advertising for the promotion on TV and press.”

Thereafter, the Bench observed -

++ It is very clear that Coca Cola (India) Ltd. was required to advertise the product of the respondent along with their own product. It was obligatory on the part of the buyer to advertise the respondent's product in all advertising done by Coca Cola (India) Ltd. on television and press. We also have gone through the show-cause notice and we find that the price offered to Coca Cola (India) Ltd. are in the range 35% to 55% of the normal wholesale price. We also observe that the so called special packing is not very different. CCI have asked the respondent to pack specific number of confectionery items in every polybag. This is for bringing in line with their own system of packing i.e. cratewise. We do not find any specific details so as to indicate that the packing was very different and that would reduce the cost of the product to almost half to one third. We also find that the respondent has not been able to produce any quantity discount schedule so as to justify such low values due to higher quantity. Similarly, respondent has not been able to produce any costing data relating to packing so as to justify such lower values.

++ We have gone through the judgment of the Hon'ble Supreme Court in the case of Indorama Synthetics (supra) quoted by the ld. AR. We are in agreement with him that to advertise the product of the respondent along with their own product is an additional consideration. We have also gone through the judgment in the case of R.Gac Electordes P. Ltd. (supra) and are of the view that the case supports the contention of Revenue. The details of exact money spent on advertisement/publicity is not known. It may not be practically possible to ascertain the same. The case pertains to the old Section 4 when the concept of the normal wholesale price existed. In the present case, normal wholesale price is known. In the facts and circumstances of the case, we are of the considered view that the assessable value of the goods will be the normal wholesale price.

The Bench also noted that the judgments cited by the respondent were distinguishable as the same covered different situations wherein wholesale dealer was advertising the manufacturers' product in order to increase his own wholesale business and in those circumstances, the Tribunal and other courts had taken the view that the expenditure incurred on advertisement by the dealers cannot be added to the AV of goods manufactured.

In fine, the appeal filed by the revenue was allowed.

In passing: Sweet success after a decade…

(See 2015-TIOL-1948-CESTAT-MUM)