2013 (1) TMI 275 - AT - Central Excise

Gift to dealers - Whether includible in assessable value - Whether in the nature of promotional activity or for benefit of appellant - The appellants are the manufacturers of Automotive Electric Horns - The appellants procure diaries for their dealers and charge 50% of the cost of such diaries if the name of the dealer is to be printed on it - Department is of the view that as free distribution of diary is nothing but publicity/advertisement to the product of the appellants - Held that - There is no evidence on record to show that these diaries have been provided by the appellants for their exclusive benefit or promotion of their business. Following the decision in case of MEDICO LABS (2007 (7) TMI 561 - CESTAT, AHMEDABAD) the value of such of those diaries recovered by the appellants from their dealers is not includible in the assessable value of the final product. In favour of assessee

Summary

Issues: Central Excise duty liability on free distribution of diaries by manufacturers.

In this judgment by the Appellate Tribunal CESTAT, CHENNAI, the issue at hand is whether the manufacturers of 'Automotive Electric Horns' are liable to pay Central Excise duty on diaries distributed for free to dealers. The manufacturers incurred 50% of the cost of diaries provided to dealers, with the remaining 50% recovered from dealers. The Department argued that the free distribution of diaries amounted to publicity/advertisement, making the recovered amount includible in the assessable value of the excisable goods. The Tribunal considered the submissions and referred to a similar case involving Medico Labs where promotional expenses recovered from distributors were held not includible in the assessable value. The Tribunal found no evidence to suggest that the diaries were provided exclusively for the benefit or promotion of the manufacturers' business. Therefore, following the precedent set in the Medico Labs case, the Tribunal concluded that the value of diaries recovered from dealers is not includible in the assessable value of the final product. Consequently, the impugned order was set aside, and the appeals were allowed with any consequential relief.

This judgment highlights the crucial issue of determining whether expenses incurred on promotional items provided to dealers should be included in the assessable value of excisable goods. The Tribunal emphasized the lack of evidence demonstrating that the diaries were exclusively for the benefit or promotion of the manufacturers' business, leading to the decision that the recovered amount from dealers for diaries should not be considered in the assessable value. The reference to a previous case involving similar circumstances provided a precedent for the Tribunal's decision, reinforcing the principle that promotional expenses recovered from distributors may not necessarily impact the assessable value of the final product. The judgment underscores the importance of establishing a direct link between promotional activities and the benefit to the manufacturer's business to determine the inclusion of such expenses in the assessable value.