2007 (6) TMI 77 - AT - Central Excise

Valuation (Central Excise) Assessee condemned the contention of revenue of inclusion of transportation and advertisement cost on the ground that the value of sale at the factory gate would be the relevant value for assessment of excise duty Held that appellant contention was correct and allowed

Summary

Issues Involved:
- Assessment of duty on sales promotion expenditure and transportation costs incurred by dealers of multi utility passenger vehicles (MUPVs).
- Applicability of Rule 5 of the Central Excise Valuation Rules, 2000 (CEVR) in determining the duty on freight and insurance.
- Interpretation of Section 4(1)(a) of the Central Excise Act regarding the assessment of excise duty.
- Inclusion of sales promotion expenses in the assessable value of vehicles manufactured by the appellants.
- Justifiability of the demand and penalty imposed by the Commissioner.

Analysis:

Assessment of Duty on Transportation Costs and Sales Promotion Expenditure:
The orders in appeal upheld the demands of duty on sales promotion expenses and transportation costs incurred by the dealers of MUPVs. The appellants argued that duty should be levied based on the transaction value at the factory gate, as per Section 4(1)(a) of the Central Excise Act. They contended that the invocation of Rule 5 of CEVR was unnecessary. The appellants had submitted certificates from Chartered Accountants showing higher expenses incurred on freight and insurance than reflected in the invoices. The Tribunal found that the transaction value does not include transportation costs to the dealer's premises, and therefore, the demand on this ground was unsustainable.

Inclusion of Sales Promotion Expenses in Assessable Value:
Regarding the sales promotion expenses, the Tribunal noted that both the manufacturer and dealers benefited from these activities. The expenditure incurred by dealers was reimbursed partially by the appellants. Citing relevant case law, the appellants argued that the expenditure incurred by dealers should not be included in the assessable value as it was mutually beneficial. The Tribunal agreed that dealers' expenditure on sales promotion was not a consideration received by the appellants from buyers and therefore not includible in the assessable value. The demand on this account was deemed unsustainable based on previous judgments.

Justifiability of Demand and Penalty:
The Commissioner affirmed the demand of duty and imposed a penalty on the appellants. However, the Tribunal found that the demands were not sustainable based on the assessment principles discussed above. The Tribunal also referred to previous judgments to support its decision. Consequently, the Tribunal allowed the appeals of M/s. Toyota Kirloskar Motors Ltd., ruling in favor of the appellants on the issues of duty assessment and penalty imposition.

This detailed analysis of the judgment highlights the key legal arguments, interpretations of relevant laws, and the Tribunal's reasoning in arriving at its decision.