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TMI Blog2024 (3) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Cenvat Credit Rules, 2004. The appellant sells their final product through a network of dealers appointed by them through dealership agreement. The appellant undertakes advertisements in media viz. Television, Newspapers etc for promoting their products. The dealers also undertake publicity and advertisements by way of inserting ads in local newspapers, hoardings, magazines, bills etc. Expenses in respect of such advertisement and publicity to the extent of 50-70% are reimbursed by the appellant and the balance advertisement expenses are incurred and borne by the dealers only. The appellant was including the advertisement expenses borne by them in value of the products and discharging excise duty on that and there is no dispute with regard to that. 2.2 An audit was conducted of the records of the appellant, wherein the appellant was directed to deposit the excise duty by including the value of advertisement expenses borne by the dealers (not reimbursed by the appellant) in the assessable value of the goods. On these allegations, two show cause notices dated 07.10.2011 and 07.05.2012 were issued to the appellant to demand excise duty of Rs. 1,16,23,572/- paid short, along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al amount to the manufacturer. 4.7 She also submits that the advertisement expenses cannot be termed as additional consideration to the price charged by the appellant which would require inclusion in their assessable value for the purpose of Section 4 of the Act. These expenses are not in the nature of any amount that the dealer is "liable to pay to, or on behalf" of the manufacturer by reason or in connection with the sale of motor vehicles. 4.8 She further submits that this issue has been considered by various benches of the Tribunal and has consistently held that advertisement expenses incurred by the dealers are not to be included in the assessable value for the purpose of payment of duty. In support of her submission, she relies on the following case laws: a) Commissioner of Central Excise, Mysore vs. TVS Motors Co. Ltd. - 2016 (331) E.L.T. 3 (S.C.) b) Commissioner of Central Excise & Customs, Aurangabad vs. Skoda Auto India Pvt Ltd. - 2020-TIOL-362-CESTAT-MUM c) Commissioner of Central Excise, JSR vs. Tata Steel Ltd. - 2018 (11) TMI 345 CESTAT KOLKATA d) Kiroloskar Oil Engines Ltd. vs. Commissioner of Central Excise, Pune-III - 2018 (4) TMI 1023 CESTAT MUMBAI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In respect of the balance advertisement expenses, which are incurred and borne by the dealers, is not to be includible in the assessable value of the vehicles cleared by the appellant. 4.12 She further submits that the judgments relied upon by the Adjudicating Authority in the impugned order can be distinguished on facts as there, the question was regarding inclusion of expenses borne by the assessee itself and therefore, those judgments are not applicable to the facts of the present case. 4.13 She also submits that the demand has been wrongly confirmed by invoking extended period of limitation. Also, she submits that the advertisement expenses incurred by the dealers have been dealt with by various judicial forums, which clearly shows that the issue involves interpretation of law and legal provisions and therefore, extended period cannot be invoked. In this regard, she places reliance on decision of the Hon'ble Supreme Court in the case of International Merchandising Company, LIC vs. Commissioner of Service Tax, New Delhi -2022 (67) G.S.T.L. 129 (S.C.). 4.14 She further submits that for the purpose of invocation of extended period, the Department needs to establish fraud, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... length and perused the material on record. According to us, the only issue in the present case relates to the inclusion of advertisement and publicity expenses incurred by the dealers as per the terms and conditions of the dealership agreement mutually agreed between the appellant and their dealers, in the assessable value of the vehicles sold by the appellant. The case of the Department is that the price at which the appellant sold the vehicles to the dealers is not the sole consideration and that is the reason that the learned Commissioner in the impugned order confirmed the demand of duty by treating the expenses borne by the dealers on advertisement and publicity as additional consideration liable to be included in the assessable value, on which duty was not paid by taking resort to the provisions of Section 4(1)(b) of the Act read with Rule 6 of the Central Excise Valuation Rules, 2000. Here, it is relevant to reproduce the provisions of Section 4(1)(b) and 4(3)(d) of the Act and Rule 6 of the Central Excise Valuation Rules, 2000 : "Section 4(1)(b) : in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of material consumed, including packaging materials, in the production of such goods; (iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods." 7. Further, we find it appropriate to reproduce the relevant clause of the dealership agreement which deals with advertising as provided in clause 36, which is reproduced herein below: "36. ADVERTISING 36.1. The Dealer shall always spend best efforts to establish a high and prestigious image of the Products and the brand, shall follow SMIPL's policy and guidelines that may be given, issued suggested and announced by SMIPL from time to time. 36.2. The Dealer shall display the entire range of Products in its Showroom/Outlet and shall at its own expense advertise and/or promote Products, Genuine Parts and Service facilities in such a manner as to secure adequate and effective publicity for the Products and/or Genuine Parts to the satisfaction of SMIPL. 36.3. In order to prohibit the Dealer engaging in any type of Unfair and Restrictive Trade Practices, it is mandatory that the Dealer shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that there is no dispute with regard to the advertisement expenses which stands reimbursed by the appellant to the dealer, which already stands factored in the assessable value of the goods. 11. We also find that this issue has been considered by various benches of the Tribunal and some of the judgments relied upon by the appellant, specifically held that the advertisement expenses incurred by the dealers on their own accord, is not to be included in the assessable value for the purpose of payment of excise duty. In this regard, we may refer to the decision of this Tribunal in the case of Honda Seils Power Products Ltd-2015 (317) ELT 510 (Tri-Del.), wherein the identical issue was involved and the Tribunal, after considering the submissions of both the parties, held as under in para 5 and para 6, which are reproduced herein below: "5. We have considered the submissions from both the sides and perused the records. The undisputed facts are that:- (a) the appellant's agreements with their dealers only have a clause which require the dealers to make efforts for promoting the sales of the appellant's products; and (b) during the period of dispute, the dealers had incurred e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer fails to perform any obligation under this agreement, his agreement can be cancelled by the appellant. There is no dispute that the dealers on their own organized advertisements of the appellant's product in their respective area by incurring their own expenses. The department is not insisted on including these expenses incurred by the dealers in the assessable value. The dispute is only in those cases, where the dealers, for certain reasons, cannot organize the advertisement of the appellant's products in their respective areas and in this regard, they approach the appellant and the appellant, in view of the dealers' request, organize the advertisement in the areas of those dealers by incurring certain expenses and since, the advertisements also mention that dealers' name and address and promote the dealers' sales also, a part of the expenses, up to about 40 per cent, are recovered from those dealers by the appellant. The point of dispute is as to whether in such cases, the advertisement expenses incurred by the appellant 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 adve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the marketability of the product but where there is a dealer in the picture and the advertisement helps the dealer apart from helping the product of the manufacturer the matter has to be looked at from a slightly different angle. Our attention has been inivited to a decision of the Tribunal in Racold Appliances v. COCE [1994 (69) E.L.T. 312]. Under an agreement between the manufacturer and the dealers, the dealers were to spend upto 2% of the total purchases for advertisement and 1.5% was to be returned by the dealers to manufacturer and the dealers were to bear 0.5%. The department took the stand that this amount of 0.5% should be added to the assessable value. The Tribunal did not accept this view as correct. The advertisement through newspaper media, cinema slides and the like was basically for the manufacturer and the finished product. The names of the dealers were to be furnished in these materials. This would certainly go to enhance the goodwill of the dealers. It is not unknown for dealers to advertise 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dealership agreement and by relying upon the decisions in the cases of Honda Seils Power Products Ltd (supra) and Maruti Suzuki India Ltd (supra), has set aside the impugned order and allowed the appeal of the assessee. Further, in the case of Maruti Suzuki India Ltd - 2008 (232) E.L.T. 566 (Tri.-Del.), on identical issue, the Tribunal has observed in para 9 and para 10 as under: "9. A perusal of the various judgments relied upon, on behalf of appellants, leads as to the following conclusion on the points of law. The advertisement for any product manufactured may fall under Rule 3 broad categories. First category is the advertisement done by the manufacturer on their own and at their own expenses. Such advertisements make the product visible and known to the prospective buyers. Such advertisement not only benefits the manufacturer but also the dealers. As such advertisements make the job of selling relatively easier. There are also advertisements which may be done exclusively by the dealer in their area out of margins received by them. Even such advertisements benefit both the dealers and to some extent the manufacturer. The joint advertisements are, therefore, can be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomer to insist of the incurring of such advertisement expenses by the customer." 12. We also find that against all these decisions cited supra, the Department has filed appeal before the Hon'ble Apex Court, but there is no stay, and therefore, the ratio in above mentioned decisions is still binding. 13. By following the ratio of the above said decisions, we are of the considered view that the advertisement expenses incurred by the dealers are not to be included in the assessable value unless there is a enforceable legal right of the appellant to insist on incurring of certain quantum of expenses on advertisement by the dealers which is not the facts in the present case. 14. Further, with regard to extended period of limitation, we find that the issue relates to interpretation of the complex provisions of law and the fact, and further that various benches of the Tribunal have considered and decided the said issue, clearly shows that there is no intention to evade payment of duty. Moreover, for invoking the extended period of limitation, the Department is required to establish fraud, collusion, wilful mis-statement or suppression of facts or contravention of any of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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