1997 (12) TMI 228 - AT - Central Excise

Summary

Issues:
Extent of including advertising expenses incurred by dealers in the assessable value.

Analysis:
The case involved a dispute regarding the inclusion of advertising expenses incurred by dealers in the assessable value. The appellants, engaged in the manufacture of tractors, marketed their products through independent dealers across the country. The appellants bore the expenses for general advertisements like press releases, radio, and television. However, the dealers also incurred promotional expenses to enhance their agency's visibility, which the appellants shared by 50%. The department contended that the entire advertising expenses should be included in the assessable value. The appellant argued that since the dealers directly benefited from the advertisements promoting their agencies, only 50% of the shared expenses should be included. They relied on a decision where it was held that advertising benefiting dealers should not be added to the assessable value.

The appellant further pointed out that the dealers' names were specifically mentioned in the advertisement materials, enhancing their goodwill and attracting more customers. They referenced another case where it was established that transactions between appellants and dealers on a principal-to-principal basis should not have the dealers' advertisement expenses added to the assessable value. The appellant also cited a Supreme Court decision to support their argument.

The department justified its action of including the dealer's advertising expenses, including expenses for gifts like key chains and ball pens, in the assessable value. However, the Tribunal carefully considered the matter and referred to the Supreme Court's observation in a previous case. The Tribunal noted that when both the assessee and the dealer benefited from shared advertising expenses, the portion benefiting the dealer should not be added to the assessable value. In this case, since both parties benefited from the advertisements, and the appellant had already included 50% of the expenses in the assessable value, the Tribunal accepted the appellant's contention. Consequently, the appeal was allowed with any necessary consequential relief.