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TMI Blog2015 (8) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts and parts as per the sales targets and will give estimates for forward requirements for such period and in such form as may be required on Hero Honda from time to time". In terms of Article XVI in the dealers' agreement, if Hero Honda, at any time, objects to the dealers' advertisement and/or promotion, the dealer shall immediately withdraw and refrain from repeating such publicity and in particular, the dealer shall not make any unaccounted or unauthorized representation regarding the specification, performance, selling price or availability of the product of parts. In terms of the termination clause (Article XXI) in the dealers' agreement, if the dealer fails to perform any obligation under this agreement, in the opinion of Hero Honda or does not rectify such defaults, if capable of remedy, within 30 days, following the day of notice pursuant to Article XXII hereafter, Hero Honda may forthwith terminate the agreement by giving a written notice to this effect. 1.2 Though the dealers incur expenses for advertisement of the appellant's product on their own, in the present case, there is no dispute about includibility of such expenses incurred by the dealers i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was a clause requiring the dealers to vigorously promote, develop and maintain sales of the products and parts of the appellant to their satisfaction and in the manner required by the appellant, and there was also a clause providing for termination of the dealership agreement if the dealer fails to perform any obligation under the agreement, these clauses in the dealership agreement cannot be treated as the clauses which put a legal obligation on the dealers to incur certain minimum quantum of expenses on the advertisement in their respective area for promoting the appellant's products and such clause had not given any enforceable legal right to the appellant to insist on incurring of any specified quantum of advertisement expenses by the dealers; that the Tribunal in the case of Honda Sales Power Products Limited Vs. CCE Meerut-III reported in 2015 (317) ELT 510 Tri Del has held that advertisement expenses incurred by the dealers would be includible in the assessable value only when there is an enforceable legal right of the manufacturer, against the dealers, to insist on incurring certain amount of expenses on the advertisement and publicity of the products and just a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise Act, 1944 or of the rules made therein with intent to evade the payment of duty which is not there in the present case inasmuch as, an identical issue had arisen in the matter decided by the Tribunal vide judgment dated 6/1/1997 reported in 1998 (100) ELT 46S (Tri-B) and the Tribunal's judgment was in the appellant's favour and besides this, in the course of audit of the records of the appellant, this very issue had been raised and the appellant had been asked to give details of the amount recovered by them from the dealers in the cases where the advertisement expenses in respect of the advertisement of the products in the area of certain dealers had been incurred by the appellant and hence, in the circumstances of the case, the appellant cannot be accused of fraud, wilful mis-statement, suppression of facts, etc. He, therefore, pleaded that in any case, the duty demand is time barred. Accordingly, it is pleaded that the impugned order is not sustainable. 4. Shri M.S. Negi, ld. DR, defended the impugned order by reiterating the findings of the Commissioner and pleaded that in terms of a clause in every dealership agreement, every dealer is under obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sole consideration for the sale and Rule 6 of the Central Excise Valuation Rules, would be applicable. He pleaded that this para also clarified that judgment delivered on this issue in respect of the earlier section 4 or the Rules made thereunder would not apply w.e.f. 1/7/2000. 5. We have considered the submissions from both the sides and perused the records. 6. The appellant sell the two-wheelers and their spare parts to their dealers all over India under a all-India price list. In terms of the appellant's agreement with their dealers, every dealer shall vigorously promote, develop and maintain sales of the products and parts to the satisfaction of and in the manner required by the appellant and the dealer shall place firm orders for such products and parts as per the sales targets and will give estimates for the forward requirements for such period and in such form as may be required by the appellant from time to time. Each dealership agreement also has clause that if a dealer fails to perform any obligation under this agreement, his agreement can be cancelled by the appellant. There is no dispute that the dealers on their own organized advertisements of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... papers for the Hero Honda Motor Cycles and by an arrangement with the wholesale dealers printing the names and addresses of wholesale dealers also and collecting proportionate charges form the wholesale dealers. The same position obtained in regard to posters, cinema slides and other media of advertisement. Appellant was receiving security deposits from the wholesale dealers and the contribution of the wholesale dealers for the advertisement campaign was being adjusted. According to the show cause Rs. 12,50,000/- or so was thus collected from the wholesale dealers. Both the lower authorities held that the advertisement campaign contributed to the marketability of the product and therefore, the charges collected were to be added to the assessable value. 3. Advertisement no doubt contributes or enhances the marketability of the product. Where the dealer is not in the picture and the advertisement campaign is conducted by the manufacturer, that can certainly be regarded as contribution wholly or exclusively to the marketability of the product but where there is a dealer in the picture and the advertisement helps the dealer apart from helping the product of the manufacturer the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the dealers' making it obligatory for the dealers' to incur certain specified quantum of expenses on the advertisement of the assessee's products. In the present case, in the dealership agreements, there is no such clause requiring the dealers to incur certain specified quantum of expenses on the advertisement and publicity of the appellant's product. The clauses of requiring the dealers to vigorously promote, develop and maintain sales of the product and parts to the satisfaction of and in the manner required by the appellant cannot be treated as the clause which gives an enforceable legal right to the appellant to insist on incurring of certain quantum of expenses on advertisement by the dealers. For this reason also, the advertisement expenses recovered from the dealers would not be includible in the assessable value. 8. In view of the above discussion, we hold that the impugned order is not sustainable on merits. 9. Even on limitation also, we find that the duty demand would survive only if the extended period under proviso to section 11A(1) is invokable and the proviso to section 11A(1) can be invoked only if there is evidence of fraud, willful m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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