2011 (2) TMI 430 - AT - Central Excise

Demand - Classification - Circular No. 643/34/2002-CX., dated 1-7-2002 - it would obviously mean that the expression to make provision for will not relate exclusively to the expenses by the buyer only but would include the expenses by the seller too - It was clarified that as per definition, the transaction value has to include the cost which the buyer incurs, or, makes provision for or on behalf of the assessee for advertising or publicity charges - It is also to be noted that that though the appellants had taken a specific defence that the expenses were incurred towards distribution of complementary items and such distribution was not forming part of any sale promotion scheme, the appellants did not produce any evidence in that regard and there is a clear finding to that effect in the impugned order - Appeal is dismissed

Summary

Issues Involved:
1. Inclusion of publicity and advertisement expenses in the assessable value for central excise duty.
2. Interpretation of the term "transaction value" under Section 4(3)(d) of the Central Excise Act, 1985.
3. Applicability of Board Circular No. 643/34/2002-CX., dated 1-7-2002 and instructions dated 30-6-2000.
4. Evaluation of evidence regarding expenses incurred for distribution of complementary items.

Detailed Analysis:

1. Inclusion of Publicity and Advertisement Expenses:
The appellants, engaged in the manufacture of cast iron, were audited, revealing unaccounted expenses towards publicity and advertisement. The Department issued a show cause notice proposing the recovery of duty based on these expenses. The adjudicating authority initially dropped the proceedings, but the Commissioner (Appeals) reversed this decision, confirming the duty amount of Rs. 2,57,770/- along with interest and a penalty of Rs. 50,000/-. The core issue was whether these expenses should be included in the assessable value for excise duty purposes.

2. Interpretation of "Transaction Value":
The appellants argued that the Commissioner (Appeals) misconstrued the concept of "transaction value" under the Excise Act. They contended that the term, as defined in Section 4(3)(d), includes only amounts payable by the buyer or incurred by the buyer on behalf of the manufacturer. They referenced Board Circular No. 643/34/2002-CX., dated 1-7-2002, which clarifies that transaction value includes costs incurred by the buyer for advertising or publicity. The appellants asserted that transaction value should not encompass every expenditure by the manufacturer but only those recoverable from the buyer or those the buyer is compelled to spend.

3. Department's Counter-Argument:
The Departmental Representative cited the Larger Bench decision in Maruti Suzuki India Ltd. v. C.C.E., Delhi-III, emphasizing that "transaction value" includes all elements integrally connected with the sale of excisable goods. The term encompasses any expenditure by the manufacturer related to advertisement or publicity. The definition in Section 4(3)(d) is extensive, including any amount charged for or to make provision for advertising or publicity, marketing expenses, etc.

4. Evaluation of Evidence:
The Tribunal noted that the definition of "transaction value" is extensive and includes expenses incurred by the manufacturer for advertising and publicity. The expression "to make provision for" includes expenses by both the buyer and the seller. The appellants failed to provide evidence that the expenses were solely for distributing complementary items unrelated to sale promotion. The Circular dated 1-7-02 and instructions dated 30-6-2000, which the appellants relied upon, did not support their case as they addressed different contexts.

Conclusion:
The Tribunal concluded that the expenses incurred by the manufacturer for publicity and advertisement should be included in the assessable value. The appeal was dismissed, upholding the order of the Commissioner (Appeals) confirming the duty amount and penalty. The appellants did not make a case for interference in the impugned order, and the interpretation of "transaction value" was affirmed as including all related expenses, not limited to those recoverable from the buyer.