2015 (10) TMI 1989 - AT - Central Excise

Valuation - Inclusion of cost of advertising - held that - There has to be written agreement with an enforcement clause to enforce the legal right to insist on advertisement under the agreement. In the absence of any such agreement with such a clause then in that event, the advertisement expenses incurred by the dealers on their own account cannot be added to the account of the assessee. - It is clear that what has been held is that unless purchase and distribution of such material by dealers is mandatory, the value of the same can not be added. Further more the transaction value will only contain the amounts collected in connection with sale of excisable goods. Every amount collected by the manufacturer from the buyer is not includible. Revenue has not been able to establish from fact that the amounts collected were in connection with sale of excisable goods. The respondents have clearly stated that the diaries and calendars are made and supplied at the request of dealers and it is not mandatory since only few dealers are buying these things - Decided against Revenue.

Summary

Issues:
1. Demand for duty on amounts collected for diaries and calendars under assessable value.
2. Interpretation of section 4(3)(d) regarding transaction value.
3. Appeal against Commissioner (Appeals) order based on Tribunal's decision in AMCO Batteries case.
4. Argument on mandatory vs. voluntary purchase of diaries and calendars by dealers.
5. Enforcement of legal rights in absence of a written agreement.

Analysis:

1. The appellants, steel product manufacturers, were selling goods through dealers and also providing diaries and calendars for abatement purposes. The revenue issued a demand notice to include the cost of advertising in the assessable value based on section 4(3)(d) of the law.

2. The revenue's demand was challenged, and the Commissioner (Appeals) set it aside relying on the Tribunal's decision in the AMCO Batteries case. The revenue appealed against this decision, arguing that the facts differed from the previous case and that a circular clarified that all amounts related to the sale of goods should be part of the assessable value.

3. The Counsel for the respondents contended that the value of diaries and calendars should only be added to assessable value if their purchase was mandatory, not voluntary. They presented evidence that only a few dealers bought these items, and most did not, emphasizing the voluntary nature of the purchase.

4. The Tribunal analyzed the case in light of the AMCO Batteries decision and emphasized the need for a written agreement with an enforcement clause to enforce legal rights regarding advertisement expenses. Without such an agreement, expenses incurred by dealers independently cannot be added to the manufacturer's account. The Tribunal dismissed the revenue's appeal, stating that unless the purchase and distribution of such material by dealers were mandatory, their value could not be included in the assessable value.

5. The Tribunal further clarified that the transaction value should only include amounts collected in connection with the sale of excisable goods. Since the diaries and calendars were made and supplied at the request of dealers and not mandatory, with only a few dealers purchasing them, the revenue's appeal was dismissed. The judgment also disposed of the cross objection filed by the respondent-assessee.