2006 (6) TMI 39 - AT - Central Excise

Appellate Tribunal overturns order on assessable value, excludes advertisement expenses.

The Appellate Tribunal allowed the appellant's appeal, setting aside the previous order regarding the reimbursement of advertisement and sales promotion ... Central Excise – Assessable value – Textiles fabrics – No evidence on record to show that buyers (authorised dealers) were under legal obligation to incur advertisement and sales promotion expenses – Not includible in assessable value of fabrics Issues:Re-imbursement of advertisement and sales promotion expenses as part of assessable value under Section 4 of Central Excise Act, 1944.Analysis:The case revolved around the re-imbursement of advertisement and sales promotion expenses by big show room owners or dealers, alleging it to be a component of the assessable value under the Central Excise Act. The appellant, a fabric manufacturer, contended that there was no legal obligation for dealers to advertise the appellant's products, citing an internal policy for compensating dealers voluntarily. The appellant argued that without enforceable legal rights to insist on advertisement, no additional value should be added as per the apex court's decision in Collector Vs. Besta Cosmetic Ltd. The appellant also challenged the applicability of Central Excise Valuation Rules and CBEC Circulars, emphasizing the absence of legal obligations on dealers for advertising expenses.The Revenue, represented by the ld. DR, maintained that if goods were within the warranty period, the expenses should be borne by the appellant and included in the assessable value. However, no evidence was presented to demonstrate the legal obligation on buyers to bear such expenses. Following the precedent set by the ACER India Ltd. case, the appeal was deemed deserving of allowance due to the lack of legal compulsion on buyers to cover the expenses.After considering the arguments, case laws, and the apex court's decision, the Appellate Tribunal concluded that the impugned order should be set aside. Relying on the apex court's decision and the absence of evidence showing legal obligations on buyers, the appeal filed by the appellant was allowed, setting aside the previous order. The judgment was pronounced on 19.6.2006.