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TMI Blog2024 (7) TMI 924X X X X Extracts X X X X X X X X Extracts X X X X ..... PUNE-III [ 2017 (12) TMI 163 - CESTAT MUMBAI ] where it was held that ' From these advertisements, it is clear that the advertisements are mainly to the effect that a particular dealer deals in the product of the appellant. Thus, these advertisements cannot be called as advertisements for the manufactured goods but are advertisements of the dealer. Undoubtedly, such advertisement indirectly helps the appellant and it is for this reason that they are reimbursing 50% of the expenses.' In view of the above judgment, it can be seen that even for the period post 2000 the courts have taken a view that advertisement cost incurred by the dealer/ distributor shall not be included in the transaction/ assessable value of excisable goods manufactured and cleared by the appellant. The impugned order is not sustainable - the impugned order is set aside - appeal allowed. - HON'BLE MEMBER ( JUDICIAL ) , MR. RAMESH NAIR And HON'BLE MEMBER ( TECHNICAL ) , MR. C L MAHAR Shri S J Vyas, Advocate , Appeared for the Appellant Shri Rajesh R Kurup , Learned Superintendent ( AR ) Appeared for the Respondent ORDER RAMESH NAIR The issue involved in the present case is that whether the advert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Commissioner of Central Excise, Pune-III, 2017 (12) TMI 163- CESTAT Mumbai:- 4. We have carefully considered the submissions made by both the sides, we find that for 50% sharing of advertisement expenses appellant have entered into agreement with dealers/distributors. On reading of the contract, it is observed that there is no compulsion on dealers/distributors to perform the advertisement. It is on the discretion of the dealers/distributors that whatever advertisement in respect of the appellants goods is done, 50% of the actual cost will be borne by the appellant and remaining 50% will be borne by the dealers/distributors. In this fact, the 50% is borne by the dealers/distributors which is the expenses of the dealers/distributors and the appellant is nothing to do with that portion of the 50%. Amount of such advertisement is not flowing to the appellant as an additional consideration. Therefore it cannot be said that the dealers/distributors bearing the advertisement cost to the extent of 50% is part of the assessable value. The relationship between the appellant and the dealers/distributors is on principal to principal basis, therefore only consideration received by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, etc. Thus, if any amount is spent by AMA or dealer for advertisement or publicity, the same will form part of the transaction value. However, in the present case, we note that AMAs are not advertising the goods per se but what they are doing is to put an advertisement such as in Yellow Pages and in other places like bill-board so as to indicate that they are dealers of INDEF equipment. The appellant has produced copy of certain advertisements which have been made in the Yellow Pages or the bill board which have been put on the sides of the road. Some of these are reproduced below :-........ 4.2 From these advertisements, it is clear that the advertisements are mainly to the effect that a particular dealer deals in the product of the appellant. Thus, these advertisements cannot be called as advertisements for the manufactured goods but are advertisements of the dealer. Undoubtedly, such advertisement indirectly helps the appellant and it is for this reason that they are reimbursing 50% of the expenses. 5. We also note that the Revenue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is the sole consideration for the sale. With effect from 1.7.2000, new Section 4 introduced the concept of valuation of excisable goods on transaction value, the conditionalities being that goods are sold by assessee, that delivery is at the time and place of removal, that assessee and buyer are not related and that price is the sole consideration for the sale. From an analysis of pre and post law, it clearly emerges that one common requirement in the old Section 4, as well as in the new Section 4 was price is the sole consideration for the sale . It therefore appears to reason that it is this conditionality that will require to be initially examined vis-avis to the facts of this case, since there is no dispute about the liability or violation of any other conditionalities of the said section 4, before or after 1.7.2000. In other words, what has to be adjudged in this case is whether the allegation of dealers sharing portion of the advertisement expenses, will constitute a extraneous consideration, in addition to the price charged and hence, whether such consideration will require to be included in the assessable value. 5.2 POSITION OF LAW FROM 28.9.1996 to 30.6.2000 The law rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purposes of this appeal, therefore, what is required to be analyzed is whether the dealers were liable to pay such advertisement expenses to or on behalf of assessee as a condition precedent to the sale of motor vehicles made to them. 5.4 From the impugned order, it is seen that the Commissioner has analyzed the case lawsin a number of decisions, in particular, the judgment of Hon ble Supreme Court in CCE Surat Vs Surat Textile Mills Ltd. - 2004 (167) ELT 379 (SC) where it had been laid down that the yardstick for including advertisement expenditure incurred by a manufacturer's customer in the assessable value, by stipulating that the same can be made only when manufacturer has an enforceable legal right against such customer to insist on incurring all such expenses. This analysis of the Commissioner has been encapsulated in para-20 of his order as under: 20. From the above, it is obvious that where there is a enforceable legal right vested with the assessee / manufacturer for making the dealer incur the advertisement expenses, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation under the agreement would also include the activities of advertisement, publicity and sales promotion and the right of the manufacturer to make the dealer incur certain expenses is inherent in clause (a) of para 8 of the Standard Provisions of the Dealership agreement. 25. Further, it could be seen that none of the dealers have refused to incur the advertisement expenses to show that it is purely optional / voluntary on the dealer's part and no dealer has independently undertook advertising without the instructions of M/s.FIPL. 26. It is seen that various advertisements are launched towards promoting sales by M/s.FIPL with the help and active participation of their dealers. It is also to be noted that the dealership agreement covers advertisement activities. 27. In terms of the definition of transaction value, any amount that the buyer is liable to pay to, or on behalf of the assessee in connection with the sale, whether payable at the time of sale or at any other time, including, 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 initiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll out their share for such co-operative advertising. However, we find that this contention has been nipped in the bud by Ld. Advocate for the appellants who has categorically averred that no such cooperative association was ever initiated by the appellant. 5.9 Lower authority has further observed that the advertisement and publicity expenditure incurred by the dealer are only to enhance the sale of the products of the manufacture, on a presumption that goods in question are not freely marketable consumer goods to be sold by the dealers at their own will and effort but are standard branded products for which so much is spent on advertisement. We fail to see the connection between these two. The facts of the caseas elucidated in the SCN and in the impugned order surely do indicate that the dealers either in consultation with the appellants, or, on their own, had organized advertisement campaigns promoting sale and release of advertisements 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of appellant, the Ld. Counsel explained that out of the total expenses for advertisement incurred by the dealer, FIPL reimburses 75%. The same is added in the assessable value and that there is no dispute on this. The dispute is only on the balance 25% incurred by the dealer which is not reimbursed and not added to the assessable value. Section 2(h) of the Indian Contract Act 1872, defines a contract as an agreement enforceable by law . The question is whether there is any legal obligation on the part of the dealer to incur the 25% expenses on advertisements. There is absolutely no evidence placed before us to establish that in casethere is default on the part of the dealer to incur the 25% expenses on advertisement, the appellant, FIPL, has a legal right to recover the same. The Learned AR has made a vain effort to contend that clause 8(a) of the agreement as reproduced above, as well as the terms and 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 reimbursi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat for this reason the cost of such advertisement was borne half and half by the appellant and the dealer. Making a deduction out of the trade discount on this account was, therefore, uncalled for. 6. As to the after sales service that the dealer was required under the agreement to provide, it did of course enhance in the eyes of intending purchasers the value of the appellant's product, but such enhancement of value enured not only for the benefit of the appellant; it also enured for the benefit of the dealer for, by reason thereof, the dealer got to sell more and earn a larger profit. The guarantee attached to the appellant's products specified that they could be repaired during the guarantee period by the appellant's dealers anywhere in the country. Thus, though one dealer might have to repair goods sold by another dealer and incur costs in that regard, he also 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 Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 with emphasis on the different transaction 'value from the assessable value', the essence of valuation principles had not undergone major change and the decisions delivered by this Court with regard to unamended provision on the principle of valuation were still applicable in determining the transaction value under the new provisions of Section 4 of the Act red with Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. In fact, the Order-in-Original in M/s. TVS Motors Company Ltd. or in other cases itself proceeds on that basis. (iii) CCE Baroda Vs Besta Cosmetics Ltd. - 2005 (183) ELT 122 (SC) In this matter involving advertisement expenses incurred by marketing agency of the assessee, the Hon ble Apex court relying upon its own judgment in the case of Commissioner Vs Surat Textile Mills[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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned in the definition of transaction value , observed that such charges cannot be includible in the transaction value of the goods. Their Lordships observed at para 8 and 11 as follows: - 8. What follows from the above is that where manufacturer himself does the ASS and incurs any expenditure thereon, the same is not deductible from the price charged by him from his buyer. Likewise, where the manufacturer has sold his goods to his dealer and wholesale dealer thereafter does ASS to the customer and incurs expenditure therefore, it cannot be added back to the sale price charged by the manufacturer from the dealer for computing the assessable value. This is more so, where the ASS is done by the dealer many weeks after the goods have been sold to him by the manufacturer. Such a post-sale activity undertaken by the dealer is not relevant for the purpose of excise since the goods have already been marketed to the dealer. .. 11. The expression any amount that the buyer is liable to pay to is of significance. This expression shows that, apart from the price of the goods, the buyer should also be liable to pay an additional amount to the manufacturer/seller. In other words, the sale of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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