2009 (11) TMI 442 - AT - Central Excise

Valuation- Advertisement Expenses- . The issue involved in this case relates to the question of adding the reimbursed amount received from the brand owners M/s. Konica towards advertisement expenses incurred by the respondents, to the assessable value of film rolls manufactured and sold by the respondents. Held that- cost of advertisement not a burden on assessee manufacturer and same does not form past of cost of impugned goods. Price at which assessee manufacturer and same does not form part of cost of independent buyer can be taken as the assessable value as they would recover their cost and profit from such independent buyers.

Summary

Issues:
1. Inclusion of reimbursed amount from brand owners towards advertisement expenses in the assessable value of film rolls.
2. Interpretation of Valuation Rules 75 and Valuation Rules 2000 regarding addition of advertisement expenses in assessable value.
3. Consideration of additional amounts received from sources other than buyers in the assessable value.
4. Application of Tribunal and Supreme Court decisions on inclusion of external reimbursements in assessable value.

Analysis:
1. The appeal concerns the Department's challenge based on a Review Order regarding the inclusion of reimbursed advertisement expenses in the assessable value of film rolls. The Commissioner's order highlighted the necessity of evidence to establish such amounts as part of the sale price, referencing Valuation Rules pre- and post-2000.

2. The Department argued for the inclusion of advertising costs in the assessable value, citing a Bombay High Court decision emphasizing that expenses enriching product value must be part of manufacturing cost. However, the respondents contended that Valuation Law does not allow inclusion of amounts from sources other than buyers, supported by Tribunal and Supreme Court precedents.

3. The Tribunal examined the case records and relevant laws, noting that the respondents sold goods at a certain price to independent buyers, receiving additional amounts from the supplier for advertising expenses. The Tribunal emphasized the lack of evidence showing these reimbursements as additional consideration from buyers, thus not impacting the assessable value based on transaction value principles.

4. Ultimately, the Tribunal upheld the Commissioner's order, rejecting the Department's appeal. The decision emphasized that the advertising expenses, reimbursed by the supplier, did not form part of the cost of goods sold to independent customers. The valuation method based on transaction value supported the exclusion of such reimbursements from the assessable value, as they did not flow back directly or indirectly from buyers, aligning with the Valuation Rules' provisions.