2007 (7) TMI 76 - AT - Central Excise

Valuation(Central Excise) - Revenue contended that assessee and buyer is the related person and the price at which the buyer sold is consider for valuation purpose - Held that revenue contention was not correct and set aside

Summary

Issues:
1. Whether the assessee and their buyer were 'related' for the purpose of Section 4 of the Act.
2. Whether the advertisement expenses incurred by the buyer were to be included in the assessable value.

Analysis:

Issue 1:
The department alleged that the respondents and their sole selling agents were related, impacting the price charged by the respondents. A show-cause notice was issued for finalization of assessments and recovery of differential duty. The original authority dropped the proceedings, accepting the price declared by the assessee as 'normal price' under Section 4 of the Act. The appeal filed by the department was rejected by the Commissioner (Appeals). The Revenue contended that mutual interest existed due to advertisement expenses not included in the assessable value. However, the Tribunal found no valid case for the Revenue, emphasizing that advertisement expenses incurred by the buyer are not includible in the assessable value, as established by previous case law. The plea of relationship between the assessee and their agent was abandoned by the Revenue, and the appeal was dismissed.

Issue 2:
The Revenue argued that advertisement expenses incurred by the buyer should be considered a financial flow-back to the assessee, indicating mutual interest. However, the Tribunal cited established case law, including the Philips India Ltd. case, to assert that such expenses are not to be included in the assessable value. Even in cases where expenses are shared under a contract, unless mandatory provisions exist, these expenses are not considered in the assessable value. The mention of a franchise agreement did not support the Revenue's case, as the agreement was between the buyer and a foreign company, not the assessee. Consequently, the appeal was dismissed, affirming that advertisement expenses do not establish mutual interest between the parties.

In conclusion, the Tribunal upheld the lower appellate authority's decision, dismissing the Revenue's appeal due to the lack of merit in their contentions regarding the relationship between the assessee and their buyer and the inclusion of advertisement expenses in the assessable value.