2006 (6) TMI 401 - AT - Central Excise

Summary

Issues Involved:
The issue involved in this case is the confirmation of demands on the appellants regarding the reimbursement of expenses incurred by dealers on advertisement and sale promotion, challenged by the appellants on the grounds that the expenses were carried out by the dealers themselves for their own purpose and on their own account, and should not be added to the assessable value.

Judgment Details:

1. Reimbursement of Expenses Issue:
The appellants contested the addition of 50% of expenses incurred by dealers for advertisement and sale promotion to the assessable value. The Commissioner held that there was an oral agreement between the appellants and dealers based on the reimbursement made to some dealers, which necessitated adding the expenses. However, the appellant argued that there must be a written agreement with an enforceable legal right for such expenses to be added. Citing various judgments including the Apex Court decision in CCE v. Besta Cosmetics Ltd., the Tribunal found that in the absence of a written agreement with an enforcement clause, the expenses incurred by dealers on their own account cannot be added to the assessable value. The impugned order was set aside, and the appeal was allowed.

2. Commissioner's Conclusion:
The Commissioner's conclusion based on the presence of an oral agreement inferred from the reimbursement made to some dealers was not accepted by the Tribunal. It was emphasized that a written agreement with an enforcement clause is necessary to enforce the legal right to insist on advertisement expenses under the agreement. As there was no such agreement in this case, the expenses incurred by dealers on their own account were not deemed addable to the assessable value.

The Tribunal's decision was based on the requirement of a written agreement with an enforcement clause for adding expenses to the assessable value, as established by relevant legal precedents.