2007 (10) TMI 244 - AT - Central Excise

Includibility of advertisement and publicity charges (incurred by the dealers) in the assessable value of vehicles (manufactured and sold to the dealers by the appellants) - held that advertisement cost sharable between the manufacturers and the dealers can not be included in the assessable value as the advertisement promoted the sale of the dealers also assessee s appeal allowed

Summary

Issues:
Interpretation of inclusion of advertisement and publicity charges in the assessable value of vehicles manufactured and sold by the appellants.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Mumbai involved a dispute regarding the inclusion of advertisement and publicity charges in the assessable value of vehicles manufactured and sold by the appellants. The Commissioner of Central Excise, Mumbai had confirmed a demand of Rs. 4,13,87,026/- along with interest and imposed a penalty on the appellants for including advertisement and publicity charges incurred by the dealers in the assessable value of the vehicles. The Tribunal referred to its earlier decision in the case of Mahindra & Mahindra v. CCE, Bombay, where it was held that advertisement cost incurred by dealers, reimbursed by the manufacturer to the extent of 50%, is not includible in the assessable value of the vehicles manufactured by the appellants. This decision was upheld by the Hon'ble Supreme Court in the case of Collector v. Mahindra & Mahindra. The Tribunal also cited subsequent orders in similar cases where it was held that advertisement costs shared between manufacturers and dealers cannot be included in the assessable value post a certain date, as the advertisement promoted the sale of the dealers as well.

The Tribunal examined the terms and conditions of the agreements between the present appellants and the dealers and found no substantial difference from the agreements in the Mahindra case. It was noted that in both cases, the incurring of advertisement expenses was as per the manufacturer's direction. Therefore, the Tribunal applied the ratio of the earlier decisions to the present case and set aside the impugned order, allowing the appeal. The judgment clarified that the advertisement costs shared between manufacturers and dealers, as directed by the manufacturer, should not be included in the assessable value of the vehicles, following the established legal precedents in similar cases.

In conclusion, the Appellate Tribunal CESTAT, Mumbai ruled in favor of the appellants, holding that the advertisement and publicity charges incurred by the dealers and reimbursed by the manufacturer should not be included in the assessable value of vehicles manufactured and sold by the appellants. The judgment relied on previous decisions and legal principles to support this interpretation, emphasizing that the direction of the manufacturer in incurring such expenses is a crucial factor in determining their inclusion in the assessable value.