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TMI Blog2017 (5) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer is liable to pay to, or on behalf of the manufacturer by reason or in connection with the sale of motor vehicles. Appeal allowed in toto - decided in favor of appellant. - E/762/2006 - 40741/2017 - Dated:- 26-4-2017 - Ms. Sulekha Beevi C.S. Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) Shri Raghavan Ramabhadran, Advocate For the Appellant Shri K. Veerabhadra Reddy, JC (AR) For the Respondent ORDER Per: Bench M/s.Ford India Pvt. Ltd., (FIPL), the appellants herein, are manufacturers of passenger cars. It appeared to the department that appellants have not discharged full duty liability on cars cleared by them in terms of Section 4 of the Central Excise Act, 1944 by not including in the assessable value of cars, the advertisement expenses, allegedly made to be shared by different dealers and finance companies. It appeared that there are two types of such advertisements: (a) one which is released by appellant themselves either specific to the territory of the single dealer, in which case, the dealer is made to pay a portion of the advertisement expenditure; or it may be region specific covering the territory of several deale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed by the Tribunal, however, leaves much to be desired in as much as several issues and aspects that arose for consideration and that had been dealt with by the Commissioner in his order have not been even mentioned leave alone satisfactorily dealt with. The order is on that short ground alone liable to be set aside. In fairness to Mr. V. Lakshmikumaran, learned counsel for the respondent, we must mention that even he was agreeable to the matter being remitted back to the Tribunal for a more articulate and satisfactory adjudication of the aspects that arise for consideration. 3. In the result, we allow this appeal, set aside the order passed by the Tribunal and remit the matter back to the Tribunal for a fresh disposal in accordance with law. No costs. 2. Accordingly, the matter is once again before this Tribunal for de novo decision. 3. Today when the matter came up for hearing, on behalf of appellant, Ld. Advocate Shri Raghavan Ramabhadran, assisted by Shri Sai Prasanth, Advocate, at the outset submits that except for a small portion, predominant period of dispute is covered by Central Excise (Valuation) Rules, 2000. He reiterated the grounds of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble value. 5.2 POSITION OF LAW FROM 28.9.1996 to 30.6.2000 The law relating to determination of the assessable value prevailing before 28.9.1996 underwent amendment and clearance of the excisable goods from different places at different point of time was called transaction value . According to section 4 (1) of the Act, the goods ordinarily sold by an assessee at the time of removal from the respective place of removal charging different prices were considered to be normal price, in relation to that place of removal at the time of removal thereof, wherefrom the sales occurred. The said sub-section reads as under : SECTION 4 Valuation of excisable goods for the purpose of charging of duty of excise - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be - (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, such expenses would form part of the assessable value. Board vide Circular dated 01.07.2002 has clearly stated that only if advertisement is done on behalf of the manufacturer such expenses have to be included. The only question that has to be gone into this case is whether M/s.Ford as legal enforceable right against their dealers to incur the expenditure towards advertisement. 5.5 We are however unable to fathom, why, after having arrived at this cogent interpretation of the ratio of the Surat Texile Mills case, and having taken note (in para-21 of the impugned order), of the appellant's contention that expenditure incurred by the dealers towards advertisement and publicity is optional and without any compulsion and that appellants never enforced the same, the ld. Commissioner, nonetheless concludes that appellants were having enforceable legal right against the dealer to insist on incurring of advertisement expenses on the following observations : 22. It is also contended by the notice that the activity of sale of finished goods by the notices and the activity of Advertisement publicity by the dealer have no connection or correlation in any manner. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but not limited to any amount charged for or to make provision for advertisement or publicity or marketing have to be included. In so far as the debit notes are concerned, the expenses initially incurred by M/s.FIPL are claimed from the dealers subsequently and are squarely covered by the use of words, any amount charged in connection with sale. With regard to credit notes representing the amount reimbursed to dealers, it is clearly seen that the activity of advertisements was planned and executed at the insistence of M/s.FIPL only and therefore it could be concluded that the advertisements incurred by the dealers were only on behalf of M/s.FIPL. Based on this conclusion, the ld. Commissioner has held that expenditure incurred by dealers are includible in the assessable value. 5.6. Coming to the dealership agreement discussed by lower authority in para-21 of the order, as per the Terms and Conditions of Sale in para-8 of the Dealer Sales and Service Agreement between the appellant and the dealers, the following has been indicated :- 8. TERMS AND CONDITIONS OF SALE (a) Prices. The Dealer shall pay the Company for Company Products purchased from the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertisements in the newspapers to clear the existing stock; these advertisements carry names of the concerned dealer and the appellant in local or regional newspapers; expenses incurred by the dealers are reimbursed either in part or full based on the debit notes raised by the dealers. From perusal of the copies of the sample advertisements submitted in appeal, this fact is confirmed. No doubt, the advertisements do highlight different Ford motor vehicles along with their pictures, along with the Ford logo. Nonetheless, the primary purpose as seen from the advertisements is to project the name and contact details of the Ford dealers in various regions. While the intent may be to enhance sale of Ford cars, it cannot however be denied that dealers too stand to gain and profit since such publicity will encourage potential buyers to contact them and possibly increase their own sales and profit. Viewed in this light, the lower authority's finding that impugned advertisement only benefits the appellant does not stand to reason. 5.10. Another ground relied upon by the lower authority is that none of the dealers have refused to incur the advertisement expenses to show that it is pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions regarding dispute resolution in the agreement, would imply a legally enforceable right existing on the part of FIPL. We have to say that the agreement does not make any whisper of the arrangement of buyer/dealer incurring the whole expenses and FIPL later reimbursing 75% only. This is an internal understanding. Clause 8(a) of the agreement states that the price to be paid by dealer include the advertisement charges. Here it is to be said at the cost of repetition, that 75% is reimbursed by FIPL and FIPL has included this amount in the assessable value; there is no dispute on this part. As to the remaining 25%, there is neither any obligation cast upon the dealer nor is there a right or remedy given to FIPL. At the most, the agreement to meet 100% advertisement charges and limit reimbursement only to 75%, thereby the dealer put to shoulder 25% of the advertisement charges can be considered only as an 'gentleman's agreement. In Oxford dictionary a 'Gentleman's agreement is defined as an arrangement or understanding, which is based upon the trust of both or all parties, rather than being legally binding. It is an unwritten agreement or transaction backed onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had the benefit of having the goods he sold reparable throughout the country. The provision as to after sales service, therefore, benefited not only the appellant; it was a provision of mutual benefit to the appellant and the dealer. (ii) CCE Mysore Vs TVS Motors Co.Ltd. - 2016 (331) ELT 3 (SC) Hon ble Supreme Court in this case dealt with question of inclusion of pre-Delivery Inspection (PDI) and After Sales Service (ASS) charges reimbursed by manufacturer to the dealers whether to be includible in assessable value. Hon ble Apex Curt held in favour of the assessee. The relevant paragraphs of this judgement are worthy of reproduction as under : 10. The position in respect of unamended provision, thus, is very clear. Coming to the amendment in Section 4 of the Act, in the year 2000, it may be noted in the first instance that definition of transaction value as per Section 4(3)(d) is exhaustive and covers within its purview, the price of goods and various other amounts charged by the assessee by reason of sale or in connection with sale. This provision reads as follows : (d) transaction value means the price actually paid or payable for the goods, when sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls[2004 (167) ELT 379 (SC)], dismissed the appeal of department on the ground that there was no legally enforceable right. The relevant portion of the judgement is reproduced as under : 3. The appellant has sought to rely upon the decision of this Court in Commissioner of Central Excise, Surat v. Surat Textile Mills Ltd. - 2004 (5) SCC 201 . In that decision the Court appears to have upheld the view that where the advertisement cost is incurred by the manufacturers/customers compulsorily or mandatorily, and where the manufacturer has an enforceable legal right against the customers to insist on incurring of such advertisement expenditure by the customers, the advertisement cost would be includible in the assessable value. Without in any fashion affirming the view taken therein it is clear even on the basis of the judgment that the clause in question gave the manufacturers/marketing agent, the discretion whether or not to advertise the assessee's products. There was no enforceable legal right with the assessee to insist on the advertisement under the agreement. 4. The appeal is, accordingly, dismissed. 9. In the light of the discussions hereinabove and also r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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