In the Customs, Excise & Service Tax Appellate Tribunal, Bangalore
Shri T.K. Jayaraman, Member (Technical) Shri M.V. Ravindran, Member (Judicial)
Glaxo Smithkline Consumer Healthcare Ltd.
Versus
Commissioner of Central Excise & Customs (Appeals), Visakhapatnam
Final Order Nos. 1-7/2009 dt. 19.12.2008 certified on 27.1.2009 in Appeal Nos. E/734-739/2007 and 517/2008
Per T.K. Jayaraman :
All these seven appeals have been filed against the following orders which are tabulated below:
S. No.
Appeal Nos.
Name of the Party
Order-in-Appeal Nos. and date
1.
E/734-739/2007
M/s. Glaxo Smithkline Consumer Healthcare Ltd.
49-54/2007 (V-II) CE dt. 28.09.2007
2.
E/517/2008
M/s. Glaxo Smithkline Consumer Healthcare Ltd.
11/2008 (V-II) CE dt. 29.04.2008
2. We heard both sides.
3. The appellants manufactured horlicks at their factory in Dowlaiswaram. It is manufactured as bulk horlicks and on clearance duty is paid on the basis of cost construction under Rule 8 of the CE valuation rules. The said horlicks removed from the factory is sent to their packing stations. In the packing stations retail packings are made and cleared to the various buyers. Cenvat credit of duty already paid is taken when the horlicks is cleared in the retail packing. Duty is paid on MRP basis in terms of Section 4A of the CE Act, 1944. The point at issue is whether the charges paid by the appellants in terms of their royalty agreement with Smithkline Beecham Asia Pvt. Ltd., is includible at the bulk stage. It is seen that in terms of the agreement the royalty is based on the sales. In fact it is equal to 5% of the net sales value of the products. Revenue proceeded against the appellants on the ground that the said royalty should be included even at the bulk stage. This was contested by the appellants. However in all the impugned orders, a decision has been taken against the appellants.
4. It was argued that royalty charges are relatable only to the sales. In any case} the royalty charges have been included at the retail stage and duty is paid in terms of Section 4-A. It was also pointed out that in their packing units at Naba (Patiala) and Sonepet (Haryana) the practice followed is that the said royalty charges at present are not includible at the retail stage and accordingly, the assessments have been finalized. In this connection, the learned SDR obtained certain clarifications from the concerned jurisdictional authorities. In terms of the said clarifications, it is seen that till 30.2.2003, the provisional assessments had been finalized by including the element of royalty in the assessable value. However, based on Board's instructions dated 13.2.2003 [reported in 2003 (054) RLT M95], the assessments after 13.2.2003 had been finalized without including the element of royalty in terms of the CAS-4. Our attention was also invited to Clause 5.3 of CAS-4 which states that direct expenses will include royalty based on production, whereas royalty paid by M/s. Glaxo Smithkline is based on the actual sales which will be payable only after further manufacturing, packing at the packing stations of the bulk material manufactured at Naba plant. The learned DR states that for the period prior to 13.2.2003, the royalty element was included and that matter has been challenged by the appellants. Presently, appellants got a favourable order from the Tribunal vide (2005(03)LCX0088 Eq 2005 (069) RLT 0774 (CESTAT-Del.)=2005 (184) ELT 183) in the case of National Aluminium Co. Ltd. Vs. CCE, wherein the appellant was also a party to the said decision. In the said decision, it has been clearly held that CAS-4 would be applicable even prior to the Board's Circular. The learned DR pointed out that this position has been challenged in the Hon'ble Supreme Court.
5. The learned advocate argued that the entire exercise is revenue neutral even if it is included at the production stage, the same would be available to the appellants as cenvat credit. Reliance is placed on the following decision:
1) CCE Vs. Textile Corpn., Marathwada Ltd., 2008(09)LCX0028 Eq 2009 (090) RLT 0233 (SC)=2008 (231) ELT 0195 (SC)
6. We have considered the various points urged by both the sides carefully. The only issue to be decided is whether the royalty charges are includible at the bulk stage. We find that the Central Excise authorities in Patiala and Sonepat had already decided the issue in party's favour by following the CAS-4. The Tribunal also in the decisions cited supra has clearly held that the principles enunciated in CAS-4 would be applicable even for the past cases. It is also seen that the royalty charges based on sales are already included in the price fixed for retail sales. To us entire exercise appears to be revenue neutral. We do not find any merit in the impugned order. Therefore we allow the appeals with consequential relief.
Operative portion of this Order was pronounced in open Court on conclusion of hearing.
