TMI Blog1995 (12) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... and Rs. 25,79,233.63 respectively. Since the publicity materials were distributed for the purpose of promoting marketability of the appellants products, the 50% cost recovered from the dealers was liable to be included in the assessable value for the purpose of levying excise duty. Suppressing these facts in the pricelists amounted to contravention of Rules 173C, 173F, 173G and 9(1) of Central Excise Rules, 1944. Additional Collector, New Delhi issued notices to the appellant to show cause why excise duty should not be levied on these amounts and why penalty should not be imposed. The appellant rebutted the notices, but the adjudicating authority after observing the procedural requirements, passed orders over-ruling the appellants objections and raising demand of duty on the aforesaid amounts and imposing penalty of Rs. 10,000/- and Rs. 50,000/- respectively. These orders are now challenged. 2. Clause 11(p) of the sales agreements entered into between the appellant and the dealers required the latter to advertise at their own expense the appellants products in their respective territories in such manner as may be required by the appellant, the layouts being subject to the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of motor cycles. Both side, placed reliance on certain decisions. 5. In Bombay Tyre International Ltd. case 1983 (12) E.L.T. 869 (S.C.) Supreme Court observed that no amount is deductible from the wholesale cash price at the factory gate in respect of advertisement or publicity charges incurred by the assessee. The reasons for the decision were separately given as reported in 1983 (14) E.L.T. 1896 (S.C.). In paragraph 49 of the judgment the Court observed now, the price of an article is related to its value (using this term in a general sense), and into that value how poured several components, including those which have enriched its value and given to the article its marketability in the trade. Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories, charges for other services after delivery to the buyer, namely after-sales servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acturer and the wholesale dealer, under which the dealer is required to render certain services to the consumer, the sale, if it is at a commercial price, does not cease to be a sale and the price at which the sale is effected must be treated as wholesale cash price. The Court further observed it is also difficult to appreciate how merely because the product was being advertised by the wholesaler and the wholesaler had undertaken to give after-sales services and comply with the normal warranties, M/s. Philips India Ltd. could be considered as favoured buyers.... Advertising a product by wholesaler is one of the well-known method by which the wholesaler attract the customers and if as a result of increasing his business the demand for the product of a manufacturer also increases the advertising by the wholesaler cannot be said to be for and on behalf of the manufacturer. In Collector of Central Excise v. R. Gac Electrodes (P) Ltd, 1988 (33) E.L.T. 485 (T), the entire production of the manufacturer was sold to a wholesaler at 27.5% discount and the wholesaler was required to organise sales promotions, publicity and advertisement of the goods at his own cost. The Assistant Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the above decisions:- (a) Where the sale is effected at the factory gate and certain charges incurred for other services after delivery by the buyer such as advertisement expenses cannot be deducted from the assessable value since such expenses promote the marketability of the article and enrich its value in the trade. (b) Where the wholesaler or dealer incurs expenditure for advertisement that would benefit not only the manufacturer but also the wholesaler or dealer since the sales would improve. (c) The manufacturer and dealer have mutual interest in maximizing the sales and that did not affect the real nature of the transaction if it was on principal to principal basis and the transaction was at arms length. In such circumstances the fact that the advertisement expense was shared would not stand in the way of manufacturer s price being accepted as against the distributor s price. (d) In every case where the Department wants to add the cost of advertisement borne by the wholesaler or dealer to the manufacturer s price to arrive at the correct value under Section 4 of the Central Excises and Salt Act, 1944, the question would be whether in the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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