2017 (3) TMI 408 - AT - Central Excise

Valuation - agreement with dealers for sales promotion - advertisement expenses - few dealres cannot arrange the advertisements and request the assessee to organize the advertisement of the products in their area, the assessee fulfills the same - whether the advertisement expenses initially incurred by the assessee and which were recovered from the dealers would be includible in the assessable value or not? - Held that - the said issue came up before this Tribunal in the assessee s own case for the earlier period 2015 (8) TMI 101 - CESTAT NEW DELHI , wherein this Tribunal held that The clauses of requiring the dealers to vigorously promote, develop and maintain sales of the product and parts to the satisfaction of and in the manner required by the appellant cannot be treated as the clause which gives an enforceable legal right to the appellant to insist on incurring of certain quantum of expenses on advertisement by the dealers. For this reason also, the advertisement expenses recovered from the dealers would not be includible in the assessable value - demand of duty with interest and penalty set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:
Assessable value - Inclusion of advertisement expenses recovered from dealers.

Analysis:
The case involved a dispute regarding the inclusion of advertisement expenses recovered from dealers in the assessable value of two-wheelers and spare parts chargeable to Central Excise duty. The assessee, a manufacturer, organized advertisements for dealers who could not do so themselves, recovering 40% of the expenses from the dealers. The department contended that these recovered expenses should be included in the assessable value. The Commissioner upheld the duty demand, interest, and penalty, but dropped the demand for the extended period. Both parties appealed this decision.

The Tribunal referred to a previous judgment in the assessee's case, where it was held that recovered advertisement expenses should not be included in the assessable value if the advertisements benefited the dealers. The Tribunal reasoned that the expenses were for the manufacturer's advertisement effort, benefiting the dealers indirectly. The Apex Court affirmed this judgment. Additionally, the Tribunal cited cases where advertisement expenses incurred by dealers were not included in the assessable value unless the manufacturer had an enforceable legal right for such expenses. The clauses in the agreement did not give the manufacturer the right to insist on specific advertisement expenses by dealers.

Based on the above analysis, the Tribunal held that the impugned order was not sustainable on merits. Following the precedent set in the assessee's previous case, the Tribunal set aside the order demanding duty, interest, and penalty from the assessee. Consequently, the appeal filed by the assessee was allowed, and the appeal filed by the Revenue was dismissed.