Tribunal excludes dealer advertisement expenses from assessable value under Central Excise Act

The Tribunal held that the 50% advertisement expenses borne by dealers/distributors should not be included in the assessable value of the appellant's goods under the Central Excise Act. The expenses were deemed not to constitute additional consideration flowing to the appellants. Relying on various precedents, the Tribunal set aside the lower authority's decision, ruling in favor of the appellants and allowing the appeals. The judgment was delivered on 30/11/2017.

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Issues:
Assessable value determination based on advertisement expenses borne by dealers/distributors.

Analysis:
The case involved the appellants engaged in manufacturing excisable goods, with agreements assigning rights to dealers/distributors for selling goods in Mumbai area. A clause in the agreement required sharing 50% of advertisement expenses. The department contended that the 50% expenses borne by dealers/distributors should be included in the assessable value of the appellant's goods under Section 4(3)(d) of the Central Excise Act, 1944. The Commissioner confirmed the differential duty demand, leading to the present appeals.

The appellant argued that the advertisement expenses were not additional consideration but expenses of dealers/distributors themselves, not affecting the transaction value. The relationship between appellants and dealers/distributors being principal to principal, only consideration received by appellants should be part of the transaction value. Various judgments, including Philips India Ltd. and Besta Cosmetics Ltd., were cited to support this argument.

The Revenue reiterated that the advertisement cost, though borne by dealers/distributors, was for sales promotion of appellant's goods and should be included in the assessable value. However, the Tribunal observed that the agreement did not compel dealers/distributors to perform advertisements, and the 50% borne by them was their own expenses. The Tribunal referenced judgments like Hercules Hoists Ltd. and Amco Batteries Ltd. to support its decision.

The Tribunal concluded that the 50% advertisement expenses borne by dealers/distributors should not be included in the assessable value, as it was not flowing to the appellants as additional consideration. Citing precedents, the Tribunal held that the demand confirmed by the lower authority was not sustainable, setting aside the impugned orders and allowing the appeals. The judgment was pronounced on 30/11/2017.

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