Case: Pepsi Foods Vs. Collector Of Central Excise, Chandigarh

from the fact that the overall consideration for the sale of concentrate is not merely its price stated in the invoice. It is something more than that, namely, royalty to be received periodically.13. Under the agreement, the obligation to buy the concentrate at the price fixed by the seller (appellant) and the obligation of the buyer to manufacture the bottled soft drinks, to sell the same by using the trademark of the appellant and to remit the prefixed royalty charges is inseparable from one another. 14. It is however, contended that in respect of the Soda manufactured by the bottlers on their own, the appellant collects royalty from them for the use of the trademark lehar even though there was no sale of any raw material. According to the learned counsel for the appellant, this is a strong indicia that the licence to use the trademark granted to the bottler in consideration of receiving the royalty is an independent and distinct transaction. No such specific plea was raised before any of the authorities including the Tribunal, though there was demur to the inclusion of royalty received on the sales of soda by the manufacturer. The documents relating to the collection of royalty on account of the sale of soda with the trademark of the appellant are not on record. The circumstances in which such a deal was entered into are not apparent from the record. We do not, therefore, propose to delve into this aspect further. We may mention that the appellants claim for exclusion of royalty received on Soda sales was accepted by the Tribunal. 15. In our view, none of the decisions cited by the learned counsel for the appellant will come to the aid of the appellant though there are certain overlapping features. 16. The first case relied upon is the Union of India vs. Mahindra & Mahindra Ltd. (1995 (76) E.L.T. 481 (S.C.). This case was rightly distinguished by the Tribunal, It was found as a matter of fact that there was no material to indicate any nexus or connection between the lumpsum payment of 15 million French Francs paid by the assessee to the foreign collaborator for providing the use of PEUGEOT Engine Technology and the supply of CKD packs to the respondents by PEUGEOT for the production of the engine. This Court observed- "In no sense, it can be stated that the price of the goods obtained later was reckoned or reflected in the lumpsum payments made, long before. The parties never had in mind the nature and extent of the spare parts that may be required later, when the collaboration agreement was entered into." 17. The fact that there was no obligation on the assessee to purchase CKD packs at all, that long before the supply of the CKD packs and spares, the royalty due to the collaborators was paid, that there was no material to show that the supply of the CKD packs or spares weighed with the parties in fixing the payments under the collaboration agreement were all taken into account by the Court to conclude that no nexus existed between the lumpsum payment under the agreement for the technical know-how and the determination of the price for supply for CKD packs/ spares. The distinguishing features are many and the appellant cannot draw any support from that case. 18. The decision of CEGAT in Collector of Customs, Bombay vs. Maruthi Udyog Ltd. (1987) (28) E.L.T. 390) has also been relied upon. The special leave petition filed against this order was dismissed in limine by this Court on 26.4.1989 by a non speaking order. This case also does not help the appellant. In this case, the contention of the Department that the import invoice price pertaining to components, assemblies and vehicles was not the sole consideration for the sale but the royalties relatable to the manufacture in India of Suzukis components also constitutes the consideration for the purchase of the imported goods was not accepted. The Tribunal held that the royalty payments were relatable directly to the manufacture of goods in India and they had no nexus with the import of goods from Japan. It was observed that neither royalty nor the trademark Maruthi Suzuki had anything to do with import of components, assemblies and vehicles from Japan". The ratio of that decision of CEGAT thus stands on a different footing. 19. One more case on which reliance was sought to be placed by the appellants counsel is the order of CEGAT in Duke & ;Sons vs. Commissioner of Central Excise (1991 (55) ELT 577) which stood affirmed by this Court by reason of dismissal of S.L.P. That was also a case of franchise fees payable by the buyers of concentrate to the assessee for using the trademark of the assessee on the soft drink bottles. The Tribunal made the following crucial observations: "The agreement under which the buyers are permitted to use the trademark is not filed either before the lower authorities or before us. Therefore, no views can be expressed as to whether it is interlinked with the sale of concentrate. There is also no evidence on record to indicate that the concentrate is sold only to those who also enter into agreement to buy the trademark. In other words, there is no evidence to establish that the agreement to purchase trademark is essential before a buyer purchases the concentrate. Similarly, there is no evidence that a buyer is not willing to purchase the concentrate without purchasing the trademark. In other words, there is no evidence to establish that the sale of concentrate is dependent on the purchase of trademark. In the absence of such evidence it is difficult to hold that the sale of concentrate is interlinked or closely connected and without the sale of trademark there is no sale of concentrate". It was under those circumstances the royalty payment was excluded from the assessable value of the concentrate. The distinguishing features are self-evidence from the observations quoted above.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our view, the substratum of the agreement regulating the terms of dealings between the parties unmistakably indicate that the invoiced price alone was not the sole consideration for the sale of concentrate. The finding of Tribunal is, therefore, unexceptionable.12. The fact that the royalty is charged for permitting the use of the trademark, but not as part of price for specific units of concentrate sold does not detract from the fact that the overall consideration for the sale of concentrate is not merely its price stated in the invoice. It is something more than that, namely, royalty to be received periodically.13. Under the agreement, the obligation to buy the concentrate at the price fixed by the seller (appellant) and the obligation of the buyer to manufacture the bottled soft drinks, to sell the same by using the trademark of the appellant and to remit the prefixed royalty charges is inseparable from oneDuke & ;Sons vs. Commissioner of Central Excise (1991 (55) ELT 577) which stood affirmed by this Court by reason of dismissal of S.L.P. That was also a case of franchise fees payable by the buyers of concentrate to the assessee for using the trademark of the assessee on the soft drink bottles. The Tribunal made the following crucialagreement under which the buyers are permitted to use the trademark is not filed either before the lower authorities or before us. Therefore, no views can be expressed as to whether it is interlinked with the sale of concentrate. There is also no evidence on record to indicate that the concentrate is sold only to those who also enter into agreement to buy the trademark. In other words, there is no evidence to establish that the agreement to purchase trademark is essential before a buyer purchases the concentrate. Similarly, there is no evidence that a buyer is not willing to purchase the concentrate without purchasing the trademark. In other words, there is no evidence to establish that the sale of concentrate is dependent on the purchase of trademark. In the absence of such evidence it is difficult to hold that the sale of concentrate is interlinked or closely connected and without the sale of trademark there is no sale ofwas under those circumstances the royalty payment was excluded from the assessable value of the concentrate. The distinguishing features are self-evidence from the observations quoted above.