2012 (1) TMI 125 - AT - Central Excise

Valuation of goods - Whether the 50% of the amount of advertisement expenses reimbursed by the appellant to distributors/dealers is to be included in the transaction value of the final products or not - Held that - dealers herein incurred the expenditure on the sales promotion to promote their interest also. Nothing is brought on record as to whether such direction was made on the part of the appellant and whether it was compulsory for the dealers to undertake sales promotions, measures or otherwise. In the absence of any such evidence, it has to be held that the said expenses were on the own free will of the distributors and dealers. If that be so, the expenses incurred by the dealers and repaid back to them by the assessee to the tune of 50% of the expenses, and inclusion thereof in the transaction value does not arise as such expenses are also in the interest of the distributor and the dealer of the final products manufactured and cleared by the assessee/appellant. - Following decision of Toyota Kirloskar Motors Ltd. - 2007 (6) TMI 77 - CESTAT, CHENNAI and Reliance Industries Ltd. - 2006 (6) TMI 39 - Appellate Tribunal, Mumbai - Decided in favour of assessee.

Summary

Issues:
Whether the advertisement expenses reimbursed by the appellant to distributors/dealers should be included in the transaction value of the final products.

Analysis:
The appeal challenged an Order-in-Appeal that confirmed demands on the appellant for not including the amount of advertisement expenses reimbursed to distributors/dealers in the assessable value for duty discharge. The appellant, a pipe manufacturer, reimbursed 50% of the advertisement charges to distributors/dealers during a specific period. The first appellate authority upheld the demands, prompting the appeal.

The appellant's counsel argued that the issue was settled and cited precedents to support the non-inclusion of dealer/showroom owners' advertisement expenses in assessable value. On the contrary, the departmental representative supported the lower authorities' findings, emphasizing that the transaction value should include advertising charges.

The Tribunal deliberated on whether the 50% of advertisement expenses reimbursed by the appellant to distributors/dealers should be part of the final products' transaction value. It was acknowledged that the appellant bore the remaining 50% of advertisement expenses, which was already included in the product cost for excise duty calculation.

Notably, the dealers voluntarily incurred sales promotion expenses for their benefit, without any evidence of coercion from the appellant. As such, reimbursing 50% of these expenses did not necessitate their inclusion in the transaction value, as they served the dealers' interests. The Tribunal referred to previous judgments supporting this interpretation.

Consequently, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.