2002 (4) TMI 478 - AT - Central Excise

Summary

Issues:
1. Inclusion of labour cost in the assessable value of Tractors during warranty period.
2. Inclusion of advertisement expenditure incurred by dealers in the assessable value of Tractors.

Analysis:

Issue 1: Inclusion of Labour Cost
The dispute revolves around whether the labour cost involved in replacing parts during the warranty period should be considered in the assessable value of Tractors. The appellant, a Tractor manufacturer, argued against the duty demand, citing a previous Tribunal decision in Telco Ltd. v. Commissioner of Central Excise, Pune, which was upheld by the Apex Court. The Supreme Court emphasized that no payment was received for labour costs during warranty service, leading to no additional realization by the manufacturer. The appellant contended that their case aligns with the Apex Court's ruling, rendering the previous Tribunal decision ineffective post the Apex Court's judgment.

Issue 2: Inclusion of Advertisement Expenditure
Regarding the advertisement expenditure incurred by dealers, the Revenue contended that such costs must be part of the Tractors' assessable value. The Commissioner, following the Apex Court's decision in Philips India Ltd., excluded the advertisement expenditure based on a shared benefit principle between the manufacturer and dealer. The Revenue argued that the judgments in Philips India and Union of India v. Bombay Tyre International should be harmoniously interpreted, suggesting that advertisement costs incurred by dealers should be included in the assessable value. However, the Tribunal found no conflict between the judgments and upheld the Commissioner's decision. The Tribunal clarified that the general principle regarding advertisement costs applies universally and does not mandate including all dealer-incurred advertisement expenses in the assessable value.

In conclusion, the Tribunal allowed the appeals of the assessee, providing consequential relief, and dismissed the Revenue's appeals. The judgment clarified the non-inclusion of labour costs during warranty service and upheld the exclusion of dealer-incurred advertisement expenses in the assessable value of Tractors, emphasizing the shared benefit principle in advertisement expenditure.