C.N.B. Nair, Member (T)
1. Both these appeals are directed against the same order-in-original No. 17/2000 dated 4-5-2000 of the Commissioner of Central Excise, Delhi-Ill. The Commissioner passed the following order :-
“Taking into consideration the facts & circumstances of the case, explained above I confirm the demand of Rs. 23,77,138/- and order its recovery from M/s. Haryana Drinks by invoking the extended period under proviso to subsection (1) of section 11A of Central Excise Act, 1944.
I order recovery of interest at appropriate rate on the duty so determined, as per provision of section 11AB ibid.
I impose a penalty of Rs. 23,77,138/- on M/s. Haryana Drinks under section 11AC.
I impose a penalty of Rs. 1 lakhs (Rupees One lakh only) on M/s. BFCL under section 11A read with rule 209 A.
Similarly, I impose a penalty of Rs. 50,000/- (Fifty thousand only) on Director & Rs. 5,000/- (five thousand only) on Shri Kulwant Sharma, Manager of M/s. Haryana Drinks under Rule 209A of Central Excise Rules, 1944. Proposal for confiscation of the Land, Plant & Machinery etc. belonging to M/s. Haryana Drinks does not appear warranted”.
2. The issue involved was the valuation of soft drinks produced by the appellant-assessee, namely, M/s. Haryana Drinks Pvt. Ltd. The material facts giving rise to the valuation dispute are that appellants manufacture the soft drink ‘Coke’. They purchase the Beverage Base for the soft drink from M/s. Britco Foods Co. Ltd. This supplier of beverage base is a wholly owned subsidiary of the Coca Cola Company Ltd. who is the brand name holder of the appellants’ soft drink. M/s. Britco Foods were sharing part of the expenditure incurred by M/s. Haryana Drinks towards advertising, marketing and sales promotion of the soft drink manufactured by M/s. Haryana Drinks. The Commissioner has taken a view in the impugned order that the expenditure reimbursed by M/s. Britco Foods to M/s. Haryana Drinks for advertising, marketing and sales promotion etc. is liable to be added to the assessable value of the soft drink manufactured by M/s. Haryana Drinks, while assessing those soft drinks to central excise duty. The impugned order is the result of this view.
3. The appellants have challenged the demand of duty contending that the sale price of soft drinks manufactured by M/s. Haryana Drinks has no concern or connection with the purchase of beverage base from M/s. Britco Foods. That transaction is entirely different from the transaction between the appellants and their soft drink dealers. The sale of soft drinks to dealers is on principal to principal basis and the sale price is the sole consideration for the same. It has, therefore, been submitted that the transaction between M/s. Britco Foods and the appellants regarding purchase of beverage base should not be brought into the valuation of soft drinks. The appellants have submitted that this issue remains settled in favour of the assessees by the decision of a Larger Bench of this Tribunal in the case of CCE, Meerut-I & Ors. v. Coolade Beverages Ltd. & Ors. [2000 (36) RLT 7 (CEGAT)].
4. With regard to penalty, it has been submitted that since no duty demand is involved, penalty is not imposable on M/s. Haryana Drinks or the other appellants. The appellants have also submitted that a penalty of Rs. 50,000/- has been imposed “on Director” of the appellant without indicating who the Director in question is and what his offence is. They submitted that the order has been passed without due care or consideration of the issues involved particularly with regard to imposition of penalties.
5. We have heard the learned Departmental Representative also, perused the records and considered the submissions made on behalf of the appellants. We find that this issue remains covered in favour of the assessee in the case of Coolade Beverages Ltd. & Ors. (supra). In that case, we upheld the finding of the Commissioner that what is relevant for the valuation of goods under Section 4 of the Central Excise Act and Rule 5 of Central Excise (Valuation) Rules is the “amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee” and that the consideration which can be reckoned for levy of central excise duty is the consideration flowing from the buyer of the goods and not from third parties to the assessees. In view of this, we hold the duty demand made in this case to be contrary to the legal provisions and set aside the duty demand. As the duty demand fails, the occasion for imposition of penalties does not arise. Accordingly, penalties imposed on the appellants are set aside. We may also observe that the appellants’ grievance that penalty was imposed as a matter of routine has substance. This is evident from the fact that a penalty has been imposed “on Director”, without even identifying the person or stating what is his offence. The appellants have several Directors and if a penalty is merited by any of them, that has to be brought out with sufficient evidence.
6. In view of what has been stated above, the appeals are allowed with consequential relief to the appellants.