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TMI Blog2015 (8) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - impugned order is not sustainable on merits. - Decision in the case of HERO HONDA MOTORS LTD. Versus COLLECTOR OF C. EX., NEW DELHI [1997 (1) TMI 304 - CEGAT, NEW DELHI] followed - Decided in favour of assessee. - Appeal No. E/2599/2008-EX[DB] - Final Order No. 51939/2015 - Dated:- 18-5-2015 - Rakesh Kumar, Member (T) And Sulekha Beevi C S, Member (J),JJ. For the Petitioner : Shri S Ganesh, Adv with Shri P K Ram Adv For the Respondent : M S Negi, DR ORDER Per: Rakesh Kumar: The facts leading to filling of these appeals are, in brief, as under: 1.1 The appellants are manufacturers of two-wheelers and their parts chargeable to Central Excise Duty under Chapter 87 of the Central Excise Tariff. The period of dispute in this case is from June, 2002 to March, 2005. During this period, the appellant were selling the two-wheelers and their spare parts to their dealers as per their all-India p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent, the same were recovered from the dealers, issued a show cause notice dated 9/7/2007 for demand of duty amounting to ₹ 4,08,49,037/- for the period from 1/6/2002 to 31/3/2005 from them along with interest thereon under section 11AB and also for imposition of penalty. 1.3 The above show cause notice was adjudicated by the Commissioner of Central Excise Delhi-III vide order-in-original dated 29/8/2008 by which the Commissioner holding that the advertisement expenses incurred by the appellant in areas of certain dealers would be includible in the assessable value to the extent, the same were recovered from the dealer, confirmed the above mentioned duty demand along with interest under proviso to section 11A (1) of Central Excise Act, 1944 along with interest thereon under section 11AB and imposed penalty of equal amount on them under section 11AC. 1.4 Against this order of the Commissioner, this appeal has been filed. 2. Heard both the sides. 3. Shri S. Ganesh, Senior Advocate and Shri P.K. Ram, Advocate, ld. Counsels for the appellant, pleaded that in this case, the appellant were selling the two-wheelers and spare parts to their the dealers all over India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacturer, the matter has to be looked at from a different angle and in such cases, the advertisement expenses incurred by the manufacturer would not be includible in the assessable value to the extent the same were recovered from the dealer; that this judgment of the Tribunal has been affirmed by the Apex Court by dismissal of the civil appeal vide order reported in 1999 (105) ELT 126 SC; that as is clear from the copies of the advertisements placed on record, each advertisement arranged by the appellant in the area of some particular dealer also mentions the dealers' name and address; that these advertisements have, therefore, benefitted the dealers also apart from enhancing the marketability of the appellant's product; that in view of this, the amount recovered by the appellant from the dealers cannot be said to be for the reason of or in connection with sale and hence, in terms of the provisions of section 4(3) (d) regarding definition of transaction value, the amount recovered by the appellant's dealers would not be includible in the assessable value. 3.1. Shri Ganesh, also pleaded that the duty demand besides being not sustainable on merits, is also tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC. 4.1 He pleaded that when in terms of agreement between an assessee and his dealers, the assessee has an enforceable legal right to insist on incurring of certain expenses by the dealers on advertisement of the assesse's products, the advertisement expenses incurred by the dealers would be includible in the assessable value. He pleaded that in the present case, the clause in the agreement requiring dealers to make vigorous efforts to promote the sales of the products coupled with the clause that on failure of the dealers to perform any obligation under this agreement, the dealership can be cancelled, clearly shows that the appellant had an enforceable legal right in respect of the dealers to insist on incurring of certain expenses on advertisement of the Appellant's products. He, therefore, pleaded that, to the extent, the advertisement expenses incurred by the appellant in certain areas which were recovered from the dealers, the same would be includible in the assessable value. 4.1. Shri Negi also cited the Board's Circular No. 643/34/2002-CX dated 1/7/2002, the para 6 of which states that even where the dealings between an assesse and the dealer are on princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant would be includible in the assessable value to the extent the same have been recovered from the dealers. In our view, when it is not disputed that the advertisement of the appellant's products in the areas of the respective dealers also mention the dealers' name and address and those advertisements have also benefitted the dealers, the amount being recovered by the appellant from the dealers cannot be said to be for the reason of or in connection with the sale of goods, as this amount would be for the advertisement and publicity effort of the appellant which has benefitted the dealer. Moreover, an identical Issue was involved in the appellant's own case in the previous period declared vide judgment reported in 1998 (100) ELT 468 (Tribunal) , in the para 3 of the judgment of which the Tribunal has held that the advertisement expenses incurred by the appellant would not be includible in the assessable value to the extent, the same were recovered from the dealers, as when the dealer is not in the picture and the advertisement campaign is conducted by the manufacturer, that can certainly be regarded as contribution wholly or exclusively to the marketability of the prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their business activities so as to attract more customers and to enhance their business. When they do so and in the absence of anything else on record, it cannot be said that the cost of such advertisement which also in a way enhances the marketability of the product should be added to the assessable value. 6.1. The above judgment of the Tribunal has been affirmed by the Apex Court by dismissal of the civil appeal vide judgment reported in 1999 (105) ELT A126 (SC). In our view, the ratio of the above judgment of the Tribunal is squarely applicable to the facts of this case. Though the above judgment of the Tribunal is in respect of the period prior to 1/7/2000 and w.e.f. 1/7/2000, the section 4 has been substituted by a new section based on transaction value concept, as discussed above, in our view when the advertisements organized by the appellant which have also benefitted the dealers, the amount recovered by the appellant from the dealer would be for the advertisement effort of the Appellant, which has promoted the sales of the dealers and the same cannot be said to be the amount received by the Appellant for the reason of in connection with the sale of the goods. 7. More ..... X X X X Extracts X X X X X X X X Extracts X X X X
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