The Supreme Court has held that Pepsi Foods Ltd was liable to pay duty to the government from the royalty it collected from bottlers for using the brand name "Lehar" in addition to the excise duty it pays on the income from sale of the beverage concentrate.
A bench comprising Justice P Venkatarama Reddi and Justice AR Lakshmanan passed this order while dismissing an appeal filed by PFL.
The soft drink giant had challenged an order of the Central Excise Commissioner holding that royalty collected from bottlers for the use of trademark "Lehar" on beverages manufactured out of the concentrate sold by PFL was includible in the assessable value of the concentrates.
Referring to the agreement betweenPFL and bottlers, Justice Reddi, writing for the bench, said PFL viewed that realisation of royalty was as important as the realisation of the sale price of the concentrate.
"Inreality and in substance, the component of royalty cannot be disassociated from the ostensible consideration for the sales of concentrate by PFL," the bench said.
JusticeReddi said there existed an inextricable bond between the obligation of the bottler to purchase the concentrate exclusively from PFL and the use of "Lehar" trademark subject to payment of royalty.
"Theroyalty which is realisable as a consideration for authorising the use of trademark cannot, therefore, be viewed in isolation," he said.