JUDGMENT

P. Venkatarama Reddi, J.-The question raised in these appeals filed by the assessee under Section 35L(b) of the Central Excise Act is whether the royalty amount collected by it from the bottlers for use of the trademark lehar on the soft drink beverages manufactured out of the concentrate sold by the appellant is includible in the assessable value of the concentrates. The appellant and its buyers (hereinafter referred to as the bottlers ) are governed by an agreement captioned as "PFL Bottling Appointment and Trademarks Licence Agreement With Bottlers", the terms of which we shall advert to later.

2. For the period 1.9.1992 to 31.3.1993 (which is covered by C.A. No. 4051 of 1996) and for the period 1.4.1993 to 31.12.1993 (which is covered by C.A.No. 1385 of 1999), the appellant filed price-lists of their product. On perusal of the details furnished with the pricelist, the Department became aware of the fact that royalty charges were being received by the appellant under the terms of an agreement permitting the use of trademark lehar . The Assistant Collector of Central Excise and Customs, Patiala issued show cause notices proposing the inclusion of the royalty charges in the assessable value and demanding duty on that basis. We are not concerned here with the advertising expenses which was also the subject matter of show cause notices issued for the earlier period. The objections filed by the appellant-assessee were overruled by the adjudicating authority and orders were passed approving the pricelists subject to the addition of royalty charges and advertising expenses and demanding differential duty for the clearances made during the said period. The adjudicating officer took the view that the sale of the concentrate was interlinked with the royalty charges inasmuch as the concentrate is sold only to those who agree to pay for the brand name. The appellate Collector rejected the assessee s appeal and confirmed the order of adjudication. On further appeal to the Tribunal, no relief was granted as regards the royalty charges though the appeal was allowed in regard to the other disputed items. The Tribunal observed thus:

"...It is thus plain that the licence to use the appellant s trademark is granted to the bottlers bound up with obligation to purchase the concentrate only from the appellants. The two are inextricably intertwined. The agreement with the bottlers is thus an indivisible and composite agreement for the sale of concentrate to them by the appellants and for the grant of licence to them for the use of the appellant s trademark on the beverages manufactured by the bottlers."..

3. This decision of the Tribunal which is the subject matter of appeal in C.A. 4051 of 1996 was followed by the Tribunal in respect of the subsequent period. C.A. No. 1385 of 1999 is preferred against the order.

4. The learned counsel for the appellant strenuously contended that the sale of concentrate by the appellant to the bottler and the collection of royalty from the bottler for the use of the trademark are two different transactions and there is no nexus between them. The payment of royalty is directly related to the use of trademark and it is realized as a percentage of the maximum retail price of the soft drink sold by the bottlers. Thus, royalty is paid when the bottle is moved out from the plant of the bottler and it has nothing to do with the sale value of the concentrate. In fact, the bottlers while fixing the M.R.P. take into account the royalty paid to the appellant and the excise duty is paid by the bottler on the price inclusive of royalty. Though this fact by itself has no bearing on the question involved, according to the learned counsel, it would only indicate that there was no loss of revenue. The counsel for the appellant laid emphasis on the fact that the royalty is being collected on the sales of soda effected by the bottler with the trademark of the assessee though the base material was not supplied by the asse