2008 (8) TMI 118 - AT - Central Excise

Manufacturer of motor vehicle & parts thereof - incurring of expenses by dealers Dept. contend that the incurring of expenses by the dealers is only on behalf of the manufacturer and these expenses are consideration for sale and accordingly differential duty is payable since extent of expenses of dealers is not linked to number of vehicles sold by them & advertisement is not done by all dealers, dealers expenditure on advertisements is not includible revenue s contention is not acceptable

Summary

Issues Involved:
1. Joint Advertisement and Sales Promotion Policy (JASP) expenses.
2. Reimbursement of cost of promotional materials.

Detailed Analysis:

1. Joint Advertisement and Sales Promotion Policy (JASP) Expenses:

Facts:
- M/s. Maruti Suzuki India Limited (appellant) markets vehicles through dealers.
- The appellant incurs national-level advertisement expenses included in the selling price.
- Dealers are encouraged to undertake local advertisements under JASP, with partial reimbursement from the appellant.
- The Department viewed dealer-incurred expenses under JASP as arising from the dealer's agreement and treated these as consideration for sale, imposing differential duty and penalties.

Arguments:
- The appellant argued that JASP-related advertisements are optional and not a sale condition.
- Dealers' advertisement expenses varied significantly, indicating no mandatory requirement.
- The Department contended that dealer agreements mandated promotion, implying an enforceable obligation.

Judgment:
- The Tribunal noted that advertisements by dealers under JASP were not uniformly undertaken and not proportionate to vehicle sales.
- It concluded that the appellant had no enforceable legal right to insist on advertisements, referencing Supreme Court decisions (Philips India Ltd. v. CCE, Surat Textile Mills).
- Therefore, dealer-incurred advertisement expenses were not considered additional consideration for sale.

2. Reimbursement of Cost of Promotional Materials:

Facts:
- The appellant provided promotional materials to dealers, who purchased them for distribution.
- The Department treated the cost of these materials as additional consideration, confirming duties and penalties.

Arguments:
- The appellant argued that promotional materials were not directly linked to vehicle sales and were sold separately.
- The Department maintained that dealership agreements obligated dealers to buy and distribute promotional materials.

Judgment:
- The Tribunal found no evidence of a direct link between promotional material sales and vehicle sales.
- It highlighted that non-purchase of promotional materials did not lead to enforceable legal actions against dealers.
- The Tribunal referenced similar cases (Kinetic Engineering Ltd. v. CCE, Escorts Ltd. v. CCE) and ruled that promotional material costs should not be included in the assessable value.

Conclusion:
- The Tribunal rejected the Department's appeal and allowed the appeals filed by the assessee, providing consequential relief.
- The decision emphasized the absence of enforceable legal obligations for dealers regarding both JASP expenses and promotional material purchases.