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2016 (3) TMI 158 - AT - Central ExciseTransaction value as defined under Section 4(3)(d) - whether includes cost of advertisements or publicity - Held that - We find that the terms of agreement are very clear that it is an option to the dealer to obtain advertising materials from the appellant at 50% of the cost. It is not disputed that only some of the dealers are availing these option. That being so it can safely be concluded that it is not mandatory for the dealers to take the advertising materials from the appellants and to share the cost of such materials. Hon ble Supreme Court in the cases of Philips India Ltd. v. CCE Pune reported (1997 (2) TMI 120 - SUPREME COURT OF INDIA ) and the decision of Surat Textile Mills 2004 (4) TMI 81 - SUPREME COURT OF INDIA wherein it has been held that the advertisement expenditure incurred by a manufacturers customer can be added to the sale price for determining the assessable value only if the manufacturer has an enforceable legal right against the customer to insist of the incurring of such advertisement expenses by the customer - Decided in favour of assessee
Issues:
1. Whether the amount recovered from dealers for advertisements should be added to the assessable value. Analysis: The case involved a manufacturer of excisable goods selling products to distributors and dealers, sharing advertisement costs with some dealers as per agreements. A demand notice sought to add the advertisement cost to the assessable value, which was confirmed by lower authorities. The appellant contended that the dealers' use of advertising material was optional, and they shared the cost at 50%. Citing legal precedents, the appellant argued that unless advertising costs were mandatory for dealers, they should not be included in the assessable value. The Tribunal examined the agreement clauses and found that dealers had the option to obtain advertising materials at 50% cost from the appellant, with only some dealers availing this option. Relying on a previous decision, the Tribunal concluded that since dealers were not obligated to take advertising materials and share costs, the advertising expenses could not be added to the assessable value. The Tribunal referred to the decision's analysis of joint advertisements benefiting both dealers and manufacturers, emphasizing that expenses incurred by dealers should be considered payment on behalf of the manufacturer. Following the legal principles established in the cited decisions, the Tribunal allowed the appeal, setting aside the impugned order. The judgment highlighted that unless manufacturers had an enforceable legal right to insist on dealers incurring advertising expenses, such costs should not be added to the assessable value. The decision emphasized the voluntary nature of dealer participation in advertising and the absence of mandatory cost-sharing requirements. In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the voluntary nature of dealer participation in advertising and the lack of enforceable legal rights for manufacturers to recover advertising costs from dealers. The judgment underscored the importance of mutual interest in joint advertisements and the distinction between optional and mandatory cost-sharing arrangements in determining the assessable value of goods.
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