M/S. ALEMBIC GLASS INDUSTRIES LTD. versus THE COMMISSIONER OF CENTRAL EXCISE

Citation: [2006] SUPP. 4 S.C.R. 550 · Decided: 14-08-2006 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
M/S. ALEMBIC GLASS INDUSTRIES LTD. 
v. 
THE COMMISSIONER OF CENTRAL EXCISE 
AUGUST 14, 2006 
[ ARIJIT PASA Y AT AND T ARUN CHATTERJEE, JJ.] 
Central Excises and Salt Act, 1944-Section 4(a)-Arms length 
transaction-Factory of assessee closed down--For revival, assessee cut 
C down its costs on advertising and publicity--Adveriising cost incurred by 
bulk purchaser to boost up sale--Inclusion of, in assessable value of assessee's 
goods--Held: There was no enforceable legal right with assessee to insist on 
advertising under the agreement with bulk purchaser-Transaction was at 
arms length, hence cost so incurred by bulk purchaser is not includible in 
assessable value of assessee's goods. 
D 
Due to closure of the appellant's glass factory, the production came to 
an end. The appellant then decided to cut down expenditure in advertisement. 
'D' who was bulk purchaser of assessee's product started advertising to boost 
its sales in respect of glass purchased from the appellant. The Department 
issued SCN demanding duty on the ground that appellant had gradually 
E transferred the expenditure on sales promotion and on publicity of its product 
to 'D' and the amount spent by 'D' was to be included in assessable value of 
glass manufactured by appellant and, therefore, duty was payable on the 
amount spent by 'D'. Collector confirmed the demand. Appellant unsuccessfully 
filed appeal before the CEGAT. Hence these appeals. 
F 
Allowing the appeals, the Court 
HELD:t.1 Where advertisement cost is incurred by the manufacturer's 
custoll'ers compulsorily and where manufacturer has enforceable legal right 
against the customers to insist on incurring of such advertisement expenditure 
G by the customers, the advertisement cost would be includible in the assessable 
value. (556-A-B( 
1.2. There was no enforceable legal right with the appellant to insist on 
the advertisement under the agreement nor any finding recorded by CEGA T 
that it had any enforceable legal right. On the contrary the CEGAT proceeded 
H 
550 
). 
,... 
ALEMBIC GLASS INDUSTRIES LTD. v. THE COMMR. OF CENTRAL EXCISE 
55 J 
on the basis, that till 1987 the appellant was incurring the expenses. The A 
circumstan~es under which 'D' gave an assurance of bulk purchase and 
commenced'progressively increasing outlay on advertising the appellant's 
product indicated that it was package outlay or revival of the appellant's factory 
I 
arrived at between them as a part of cost reduction exercise of the appellant. 
I 
No material was placed by Revenue before the CEGAT that there was any tacit B 
understanding which was also not spelt out in the show cause notice. 
: 
(566-C-El 
I 
Co/lect~r of Central Excise, Baroda v. Bes/a Cosmetics Ltd., (200513 
I 
sec 792, relied on. 
Union of India v. Bombay Tyre International Ltd., (198411 SCC 467; C 
Commissioner of Central Excise, Surat v. Surat Textiles Mills Ltd. and Ors., 
(2004( 5 SCC 201 and Commissioner of Central Excise, Vadodara v. Alembic 
Glass Industries Ltd., (1996) 88 ELT 296, referred to. 
2. There is no material to show that there is no arrangement for D 
reimbursement. The factual position shows that the transaction was on a 
principal to principal basis. Once wholesale dealings at arms length are 
established, the determination of the wholesale cash price for the purpose of 
Section 4(a) of the Central Excise Act may not depend upon the number of 
such wholesale dealings. (558-B-E( 
3. 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 price is charged because of extra-commercial considerations, the 
price so charged would not be the 'wholesale cash price' for levying excise 
under Section 4(a) of the Act. (558-C-Dl 
A.K. Roy and Anr. v. Voltas limited, ( 197313 SCC 503, relied on. 
Philips India Ltd. v. Collector of Central Excise, Pune ( 1997( 6 SCC 
31, referred to. 
E 
F 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 43-44of1998. G . 
From the Judgment and Order dated 13.6.1997 of the Customs, Excise 
& Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai in 
Order No. 251 O/dtd. 5/97 in Appeal No. E/4968/92-A and Order dated 19 .11.1997 
in Order No. 5218/WZB/l 997 in Stay No.E/Misc (MODFIN) 475/97-Bom. 
H 
A 
552 
SUPREME COURT REPORTS [20061 SUPP. 4 S.C.R. 
WITH 
Civil Appeal Nos. 4234-4247/1999. 
D.A. Dave, Nandini Gore, Pragya Singh Bansal, R.N. Karanjawala, Manik 
Karanjawala

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