TMI Blog2024 (3) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses incurred by the dealers, have been incurred by them on their own accord, and not for or on behalf of the appellant because the dealership agreement does not provide for any such expenses to be incurred by the dealers on behalf of the appellant. The price of the vehicles remains the same and is not dependent upon whether the dealers are incurring expenses on advertisement or not. No doubt that the main reason for undertaking advertisement by the dealers is to promote their own business and incidentally the appellant is also benefitted by increase sale of the vehicles, but it cannot be the only ground for inclusion of advertisement expenses incurred by the dealers to the assessable value for the purpose of determining the duty payable from the sale of the excisable goods - perusal of various terms and conditions shows that such expenses are purely optional at the end of the dealers and they have to decide whether to incur such expenses or not, because it is found that there are certain dealers who do not opt for incurring such expenses and a list of those dealers has also been given by the appellant in their additional submissions. There is no dispute with regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is set aside - appeal allowed. - HON BLE SH. S. S. GARG, MEMBER (JUDICIAL) AND HON BLE SH. RAJEEV TANDON, MEMBER (TECHNICAL) APPEARANCE: For the Appellant: Ms. Krati Singh and Sh. Aman Singh, Advocates. For the Respondent: Sh. Narinder Singh and Sh. Yashpal Singh, Ars. PER : S. S. GARG The present appeal is directed against the impugned order dated 25.10.2012 passed by the Commissioner of Central Excise, whereby the learned Commissioner has confirmed the demand of duty of Rs. 1,16,23,572/- under Section 11A(4) of the Central Excise Act, 1944 (hereinafter referred to as the Act ) along with interest and also imposed equivalent penalty under Section 11AC of the Act. 2.1 Briefly stated facts of the case are that the appellant is engaged in the manufacture of motorcycle, scooters and parts thereof falling under Chapter 87 of the First Schedule to the Central Excise Tariff Act, 1985 and is availing facility of Cenvat Credit under the Cenvat Credit Rules, 2004. The appellant sells their final product through a network of dealers appointed by them through dealership agreement. The appellant undertakes advertisements in media viz. Television, Newspapers etc for promoting their p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for any such advertisement expenses to be incurred by the dealers on behalf of the appellant. 4.4 She further submits that reading of the various clauses in the dealership agreement shows that the appellant does not have any enforceable right against the dealers if such advertisements are not undertaken by them. 4.5 She also submits that whether the dealers incur the expenses for advertising or not, the price at which the vehicles are sold by the appellant to the dealers remains the same. Therefore, the expenses incurred by the dealers are not includible in the assessable value of the vehicles cleared by the appellant. 4.6 She further submits that the expression any amount that the buyer is liable to pay to under Section 4(3)(d) of the Act is of significance and the said expression shows that at the time when the sale of the goods is made, apart from the price of the goods, the buyer is also made liable to pay an additional amount to the manufacturer. 4.7 She also submits that the advertisement expenses cannot be termed as additional consideration to the price charged by the appellant which would require inclusion in their assessable value for the purpose of Section 4 of the Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot opt to incur the advertisement expenses in their additional submissions. Further, she submits that this issue has also been considered by various benches of the Tribunal and it has been held in favour of the assessee in the following decisions: a) Amco Batteries Ltd. vs. Commissioner of Central Excise, Bangalore - 2006 (196) E.L.T. 436 (Tri.-Bang.) b) Commissioner of Central Excise, Nagpur vs. Diffusion Engineering Ltd. - 2016 (331) E.L.T. 153 (Tri.-Mumbai) c) Luminous Electronics Pvt Ltd. vs. CCE - 2016-TIOL-931- CESTAT-Del. d) Catvision Products Ltd. vs. Commissioner of Central Excise, Noida - 2006 (194) E.L.T. 126 (Tri.-Del.) 4.11 She also submits that the extent of advertisement expense which stands reimbursed by the appellant to the dealers are already factored in the assessable value of the goods and this fact has not been disputed by the Department. In respect of the balance advertisement expenses, which are incurred and borne by the dealers, is not to be includible in the assessable value of the vehicles cleared by the appellant. 4.12 She further submits that the judgments relied upon by the Adjudicating Authority in the impugned order can be distinguished on facts as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (331) ELT 3 (SC) and also the judgment of Hon ble Bombay High Court in the case of Tata Motors Limited 2012 (286) ELT 161 (Bom.) and submitted that the issue relates to advertisement and publicity charges borne by the dealers has not been dealt by the Hon ble Supreme Court in the case of TVS Motors Company Ltd (supra) and by the Hon ble Bombay High Court in the case of Tata Motors Limited (supra) and therefore, these judgments do not help the appellant in any way. 5.4 The learned DR further submitted that though certain decisions of the Tribunal relied upon by the appellant decided the issue in their favour, but against all those judgments, the Department has filed appeal before the Hon ble Apex Court, but there is no stay granted by the Apex Court in favour of the Department. 6. We have considered the submissions made by both the parties at length and perused the material on record. According to us, the only issue in the present case relates to the inclusion of advertisement and publicity expenses incurred by the dealers as per the terms and conditions of the dealership agreement mutually agreed between the appellant and their dealers, in the assessable value of the vehicles sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely : - (i) value of materials, components, parts and similar items relatable to such goods; (ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods; (iii) value of material consumed, including packaging materials, in the production of such goods; (iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods. 7. Further, we find it appropriate to reproduce the relevant clause of the dealership agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. No doubt that the main reason for undertaking advertisement by the dealers is to promote their own business and incidentally the appellant is also benefitted by increase sale of the vehicles, but it cannot be the only ground for inclusion of advertisement expenses incurred by the dealers to the assessable value for the purpose of determining the duty payable from the sale of the excisable goods. 9. We also find that perusal of various terms and conditions shows that such expenses are purely optional at the end of the dealers and they have to decide whether to incur such expenses or not, because we find that there are certain dealers who do not opt for incurring such expenses and a list of those dealers has also been given by the appellant in their additional submissions. 10. We also find that there is no dispute with regard to the advertisement expenses which stands reimbursed by the appellant to the dealer, which already stands factored in the assessable value of the goods. 11. We also find that this issue has been considered by various benches of the Tribunal and some of the judgments relied upon by the appellant, specifically held that the advertisement expenses incurred by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the identical issue was involved and after considering the various submissions of both the parties, the Tribunal in para 6 and para 7 held as under: 6. The appellant sell the two-wheelers and their spare parts to their dealers all over India under an 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 s product in their respective area by incurring their own expenses. The department is not insisted on including these expenses incurred by the dealers in the assessable value. The dispute is only in those cases, where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has to be looked at from a slightly different angle. Our attention has been inivited to a decision of the Tribunal in Racold Appliances v. COCE [1994 (69) E.L.T. 312]. Under an agreement between the manufacturer and the dealers, the dealers were to spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. Further, in the case of Honda Motorcycle Scooter India Pvt Ltd - 2017 (6) TMI 372 , on identical issue, the Tribunal after considering the various clauses of the dealership agreement and by relying upon the decisions in the cases of Honda Seils Power Products Ltd (supra) and Maruti Suzuki India Ltd (supra), has set aside the impugned order and allowed the appeal of the assessee. Further, in the case of Maruti Suzuki India Ltd - 2008 (232) E.L.T. 566 (Tri.-Del.), on identical issue, the Tribunal has observed in para 9 and para 10 as under: 9. A perusal of the various judgments relied upon, on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the department that the failure on the part of the dealer may lead to the cancellation of dealership and therefore there is a enforceable legal right is acceptable. Such cancellation cannot enable recovery of dealer s share of cost of advertisements. Therefore, this case is squarely covered by the decisions of the Hon ble Supreme Court in the cases of Philips India Ltd. v. CCE, Pune reported in 1997 (91) E.L.T. 540 (S.C.) and the decision of Surat Textile Mills [2004 (167) E.L.T. 379 (S.C)] cited supra wherein it has been held that the advertisement expenditure incurred by a manufacturers customer can be added to the sale price for determining the assessable value, only if the manufacturer has an enforceable legal right against the customer to insist of the incurring of such advertisement expenses by the customer. 12. We also find that against all these decisions cited supra, the Department has filed appeal before the Hon ble Apex Court, but there is no stay, and therefore, the ratio in above mentioned decisions is still binding. 13. By following the ratio of the above said decisions, we are of the considered view that the advertisement expenses incurred by the dealers are not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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