2008 (8) TMI 118 - AT - Central Excise

Tribunal rules JASP expenses not additional sale consideration

The Tribunal ruled in favor of M/s. Maruti Suzuki India Limited, holding that expenses incurred by dealers under the Joint Advertisement and Sales ... Manufacturer of motor vehicle & parts thereof - incurring of expenses by dealers – Dept. contend that the incurring of expenses by the dealers is only on behalf of the manufacturer and these expenses are consideration for sale and accordingly differential duty is payable – since extent of expenses of dealers is not linked to number of vehicles sold by them & advertisement is not done by all dealers, dealers expenditure on advertisements is not includible – revenue’s contention is not acceptable Issues Involved:1. Joint Advertisement and Sales Promotion Policy (JASP) expenses.2. Reimbursement of cost of promotional materials.Detailed Analysis:1. Joint Advertisement and Sales Promotion Policy (JASP) Expenses:Facts:- M/s. Maruti Suzuki India Limited (appellant) markets vehicles through dealers.- The appellant incurs national-level advertisement expenses included in the selling price.- Dealers are encouraged to undertake local advertisements under JASP, with partial reimbursement from the appellant.- The Department viewed dealer-incurred expenses under JASP as arising from the dealer's agreement and treated these as consideration for sale, imposing differential duty and penalties.Arguments:- The appellant argued that JASP-related advertisements are optional and not a sale condition.- Dealers' advertisement expenses varied significantly, indicating no mandatory requirement.- The Department contended that dealer agreements mandated promotion, implying an enforceable obligation.Judgment:- The Tribunal noted that advertisements by dealers under JASP were not uniformly undertaken and not proportionate to vehicle sales.- It concluded that the appellant had no enforceable legal right to insist on advertisements, referencing Supreme Court decisions (Philips India Ltd. v. CCE, Surat Textile Mills).- Therefore, dealer-incurred advertisement expenses were not considered additional consideration for sale.2. Reimbursement of Cost of Promotional Materials:Facts:- The appellant provided promotional materials to dealers, who purchased them for distribution.- The Department treated the cost of these materials as additional consideration, confirming duties and penalties.Arguments:- The appellant argued that promotional materials were not directly linked to vehicle sales and were sold separately.- The Department maintained that dealership agreements obligated dealers to buy and distribute promotional materials.Judgment:- The Tribunal found no evidence of a direct link between promotional material sales and vehicle sales.- It highlighted that non-purchase of promotional materials did not lead to enforceable legal actions against dealers.- The Tribunal referenced similar cases (Kinetic Engineering Ltd. v. CCE, Escorts Ltd. v. CCE) and ruled that promotional material costs should not be included in the assessable value.Conclusion:- The Tribunal rejected the Department's appeal and allowed the appeals filed by the assessee, providing consequential relief.- The decision emphasized the absence of enforceable legal obligations for dealers regarding both JASP expenses and promotional material purchases.