This Tax Alert which gives an update on the recent decision of the Mumbai Tribunal, in the case of Godrej Consumer Products Ltd. vs. Commissioner of Central Excise (CCE), Indore [TS-181-Tribunal-2014-EXC].
The issue in this case was whether non-compete fee and trademarks licence fee received, will be included in the assessable value of the goods manufactured, in terms of Rule 5 of the Central Excise Valuation Rules (Valuation Rules), 1975.
Based on the factual matrix of the case, it was held that the non-compete fee and the trademarks licence fee shall be includible in the assessable value of the goods manufactured, in terms of Section 4(1) of the Central Excise Act , 1944 read with Rule 5 of the Valuation Rules, as it was construed to be “additional consideration” flowing directly or indirectly to the manufacturer from the buyer.
On the other hand, it was held that advertisement expenses incurred by the buyer will not be includible in the assessable value, in the absence of a binding stipulation to incur the same, in terms of the agreement between the parties.
However, it needs to be examined whether the non-compete fees and trademark licence fees, which have been received in context of the transfer of marketing business, can be attributed to the manufacturing activity (such as contract manufacturing) while determining the assessable value.
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