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2024 (7) TMI 924 - AT - Central ExciseDetermination of transaction/ assessable value of excisable goods - whether the advertisement cost incurred by the dealer/ distributor is includible in the assessable value of the excisable goods manufactured and sold by the appellant to or through such dealer/ distributors? - HELD THAT - For the period prior to new Section 4 and Valuations Rules, 2000 there are judgments of the Hon ble Supreme Court that the advertisement cost incurred by the dealer/ distributor will not be included in the assessable value of excisable goods. However, the Revenue s contention is that post 1.7.2000 as per the amended Section 4 and Valuation Rules made their under such advertisement cost incurred by the dealer/distributor shall be included in the assessable value as clarified by the board in circular No. 643/34/2002-CX dated 01.07.2002. Reliance placed in the HENKEL ADHESIVES TECHNOLOGIES INDIA P. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III 2017 (12) TMI 163 - CESTAT MUMBAI where it was held that ' From these advertisements, it is clear that the advertisements are mainly to the effect that a particular dealer deals in the product of the appellant. Thus, these advertisements cannot be called as advertisements for the manufactured goods but are advertisements of the dealer. Undoubtedly, such advertisement indirectly helps the appellant and it is for this reason that they are reimbursing 50% of the expenses.' In view of the above judgment, it can be seen that even for the period post 2000 the courts have taken a view that advertisement cost incurred by the dealer/ distributor shall not be included in the transaction/ assessable value of excisable goods manufactured and cleared by the appellant. The impugned order is not sustainable - the impugned order is set aside - appeal allowed.
Issues Involved:
1. Whether the advertisement cost incurred by the dealer/distributor is includible in the assessable value of the excisable goods manufactured and sold by the appellant. Detailed Analysis: 1. Advertisement Cost and Assessable Value: The primary issue in this case is whether the advertisement cost incurred by the dealer/distributor should be included in the assessable value of the excisable goods. The appellant argued that this issue is no longer res-integra, citing various judgments of the Supreme Court and Tribunal which have established that such costs should not be included in the assessable value. 2. Appellant’s Argument: The appellant’s counsel, Shri S. J. Vyas, referenced several judgments to support their claim, including: - Philips India Ltd. (1997): Established that advertisement costs incurred by dealers are not includible in the assessable value. - Henkel Adhesives Technologies India P. Ltd. vs. Commissioner of Central Excise, Pune-III (2017): Emphasized that 50% of advertisement costs borne by dealers/distributors are not part of the assessable value. - Ford India Pvt. Ltd. vs. Commissioner of Central Excise, Chennai-III (2017): Clarified that advertisement expenses incurred by dealers are not to be included in the assessable value, especially when there is no enforceable legal right for the manufacturer to insist on such expenses. - Skoda Auto India Pvt. Ltd. (2020): Reinforced that advertisement costs incurred by dealers are not includible in the assessable value if there is no enforceable legal right. 3. Revenue’s Argument: The Revenue, represented by Shri Rajesh R Kurup, contended that post-1.7.2000, as per the amended Section 4 and Valuation Rules, the advertisement costs incurred by dealers/distributors should be included in the assessable value. This was supported by a board circular dated 01.07.2002. 4. Tribunal’s Findings: The Tribunal carefully considered the submissions and the records. It found that even after the 2000 amendment, the legal position established by the Supreme Court in Philips India Ltd. and other subsequent judgments remained applicable. The Tribunal noted that: - The relationship between the appellant and the dealers/distributors is on a principal-to-principal basis. - Only the consideration received by the appellant forms the transaction value. - The advertisement costs borne by dealers/distributors do not flow to the appellant as additional consideration. 5. Specific Judgments Referenced: - Henkel Adhesives Technologies India Pvt. Ltd. (2017): Confirmed that 50% advertisement expenses borne by dealers/distributors are not includible in the assessable value. - Ford India Pvt. Ltd. (2017): Emphasized that dealers' advertisement expenses are not includible in the assessable value unless there is an enforceable legal right. - Skoda Auto India Pvt. Ltd. (2020): Reiterated that advertisement costs incurred by dealers are not includible in the assessable value without an enforceable legal right. 6. Conclusion: The Tribunal concluded that the advertisement expenses borne by the dealers/distributors are not includible in the assessable value of the excisable goods. The impugned order was set aside, and the appeal was allowed. Pronouncement: The judgment was pronounced in the open court on 16.07.2024.
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