2014 (11) TMI 118 - AT - Central Excise

Valuation of goods - inclusion in the assessable value of the expenses incurred on advertisement and publicity , incentive and discount to dealers and vehicle and handling staff cost - Held that - incentive and discount to dealers , expense is on account of giving to free duty paid bottles of aerated waters to the dealers on purchase by them of certain quantity of the crates. The appellant thus give discount in form of free duty paid bottles of aerated waters instead of reduction in price. In terms of Apex Court judgment Bombay Tyre International Ltd.(1983 (11) TMI 70 - SUPREME COURT OF INDIA), trade discount is not to be included in the assessable value if it is known price to sale. Some view has been expressed by the Apex Court in case of Union of India Vs. Madras Rubber Factory Ltd., reported in 1995 (5) TMI 28 - SUPREME COURT OF INDIA . In this case from the records it is clear that discount policy was known to the dealers and discount in form of free duty paid bottles of aerated waters were given to the dealers in accordance with the discount policy. Therefore it cannot be said that the discount was not known prior to sale. In view of this, the impugned order dis-allowing the deduction of this trade discount given in form of free duty paid bottles of aerated waters is not correct. There is no evidence to show that this expense had been incurred on Advertisement & Publicity Campaign organized by the appellant. Even if this is so, since this expense has been incurred by the Appellant, it is deemed to be included in the assessable value. Therefore, the impugned order confirming the duty demand on the expenses shown in the Balance Sheets on Advertisement and Publicity , is not correct. Since these expenses represent the expense incurred on the salaries of the drivers/helpers of the vehicles for transport of the goods to the dealers premises and also the expense incurred on maintenance of the vehicle and loading/un-loading of the goods outside the factory, in our view, these expenses would not be includible for the assessable value and as such the impugned order confirming duty demand on these expenses is not correct. impugned order is not sustainable - Decided in favour of assessee.

Summary

Issues:
- Inclusion of certain expenses in the assessable value for Central Excise duty calculation
- Application of trade discounts and their impact on assessable value
- Treatment of expenses related to advertisement, publicity, and vehicle handling staff costs

Analysis:

Issue 1: Inclusion of certain expenses in the assessable value
The case involved a dispute over the inclusion of specific expenses in the assessable value for Central Excise duty calculation. The investigating officers contended that expenses such as 'Advertisement and Publicity', 'incentive and discount to dealers', 'vehicle and handling staff cost', and 'empties sorting charges' should have been part of the assessable value but were not included. The total of these expenses for the relevant periods amounted to significant sums, leading to a demand for allegedly short-paid duty and penalties. The Commissioner initially confirmed a duty demand and imposed penalties, which were challenged by the appellant.

Issue 2: Application of trade discounts
Regarding the 'incentive and discount to dealers', the appellant provided free duty-paid bottles of aerated waters to dealers based on a certain quantity of crate purchases. The appellant argued that this practice constituted a trade discount, which should not be included in the assessable value if known prior to sale, citing relevant case law. The Tribunal agreed with the appellant, ruling that the trade discount given in the form of free duty-paid bottles of aerated waters should be allowed as a deduction from the assessable value.

Issue 3: Treatment of specific expenses
The expenses categorized under 'Advertisement and Publicity' were related to painting the name and logo of the company on vehicles, not to an organized advertising campaign. The Tribunal found that since this expense was incurred by the appellant, it should be included in the assessable value. However, the expenses under 'Vehicle and Handling Staff Cost', which included salaries, maintenance, and loading/unloading charges, were deemed not includible in the assessable value. The Tribunal agreed with the appellant's argument that these expenses were related to transportation and were incurred outside the factory, thus should not impact the assessable value.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal based on the findings related to the trade discount, advertisement and publicity expenses, and vehicle handling staff costs.