2007 (5) TMI 102 - AT - Central Excise

Valuation(Central excise) - Department contended that expenditure incurred by dealers in promoting sales of assessee s products by advertising them includible in the assessable value and accordingly demand duty along with penalty - Held that department contention was not correct and set aside

Summary

Issues:
- Inclusion of dealer-incurred advertising expenditure in the assessable value of cars for excise duty calculation.

Analysis:
The appeal before the Appellate Tribunal challenged a demand for differential duty, cesses, and penalty imposed on a car manufacturer for cars manufactured and cleared between 2000 to 2005. The key issue revolved around whether the expenditure incurred by dealers in promoting the manufacturer's products through advertising should be considered in the assessable value of cars. The manufacturer reimbursed part of the advertising expenses incurred by dealers and financiers, but the Commissioner demanded duty on the unreimbursed portion, treating it as part of the price of the cars sold. The adjudicating authority relied on a Supreme Court decision and the terms of the agreement between the manufacturer and dealers to support this decision.

The Tribunal analyzed the case records and submissions from both sides. It emphasized that in an arms-length transaction, the value for charging excise duty is the total consideration received by the manufacturer from the buyer. The Tribunal noted that the advertisement benefited both the manufacturer and dealers, but there was no contractual obligation for dealers to incur advertising expenses on behalf of the manufacturer. Despite the manufacturer reimbursing part of the advertising costs, there was no enforceable legal right for the manufacturer to require dealers to incur such expenses. The Tribunal cited precedents where it was held that advertisement costs could only be included in the assessable value if incurred compulsorily by customers.

Referring to previous judgments and legal principles, the Tribunal concluded that since the dealers had incurred advertising expenses voluntarily without a contractual obligation, such expenses should not be included in the assessable value of the cars. Therefore, the order demanding duty and imposing penalties was deemed unsustainable. Consequently, the Tribunal set aside the impugned order and allowed the manufacturer's appeal.