PEPSI FOODS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) This petition under Article 226 of the Constitution is directed against the order dated 16 June 1994 read with order dated 21 October 1994 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi, Special Bench "A", passed under section 35-F of the Central Excises & Salt Act, 1944 (for short 'the Act').

(2.) The petitioner had filed an appeal before the Appellate Tribunal against the appellate order dated 7 February 1994 of the Collector of Central Excise (Appeal), Chandigarh, by which he confirmed the order-in-original dated 11 November 1993 passed by the Assistant Collector, Central Excise, Patiala. The Assistant Collector had raised a demand of central excise duty of Rs.2,16,06,131.00 . In the appeal before the Appellate Tribunal the petitioner sought stay of recovery of the aforesaaid Central Excise duty, and for that purpose had filed an application under section 35-F of the Act. The Appellate Tribunal by order dated 16 June 1994 directed the petitioner to deposit a sum of Rs.1 crore within a period of 12 weeks from the receipt of the order. The petitioner then filed another application for modification of the order dated 16 June 1994 which was rejected by the Appellate Tribunal by order dated 21 October 1994 but granted one month's further time to enable the petitioner to comply with its earlier order dated 16 June 1994. The petitioner aggrieved by both the orders dated 16 June 1994 and 21 October 1994 has filed this petition seeking to quash the same. When the matter came up for admission before us we, while issuing notice to show cause as to why rule nisi be not issued, directed the petitioner to deposit Rs.50 lakhs which the petitioner has done. The respondents have filed their answer to show cause notice opposing the admission of the petition.

(3.) The petitioner is engaged in the manufacturer of soft drink concentrates which it is selling to various bottlers who are in no way connected with the petitioner. The petitioner pays appropriate excise duty on the manufacture of concentrates on ad valorem basis on the price at which the goods are sold to the bottlers. Petitioner, it is stated, collects royalty charges from bottlers for use of the brand name 'Lehar' which belongs to the petitioner on the basis of agreement entered into with the bottlers. It is averred that this collection of royalty charges is over and above the sale price at which the concentrate is sold to the bottlers. The adjudicating authorities have demanded duty on the royalty charges collected by the petitioner. They have also demanded duty on the advertisement expenses incurred by the petitioner. On the examination of the relevant records the adjudicating authorities found that under the franchise agreement between the petitioner and the bottlers it was mandatory for the bottlers to use the brand name 'Lehar' with their beverage and that the said agreement also contained the clause that the bottlers would undertake appropriate advertising and sale promotions activities. The department also found that the petitioner was also advertising for its product, but that advertising was for final product, i.e., soft drink concentrates like LEHAR PEPSI, LEHAR MIRINDA, LEHAR 7UP, etc. The department was of the view that since the word "LEHAR" was a brand name whereas LEHAR PEPSI, LEHAR MIRINDA & LEHAR 7UP, etc., were names of its soft drink concentrates, as per section 4 of the Act, the expenses incurred on the sale promotion/advertisement were to be included in the assessable value of the concentrates sold to the bottlers. Element of excise duty towards royalty comes to over Rs.32 lakhs and that of advertisement over Rs.1.77 crores.