Exclusion of PDI charge & advertisement expenses from assessable value for Central Excise Duty

The appeal was allowed as the Tribunal held that the PDI charge, advertisement expenses, and cost of publicity materials should not be included in the assessable value for Central Excise Duty. The PDI charge was deemed unrelated to the manufacturer, while the advertisement expenses were considered beneficial to both dealers and the manufacturer. The cost of publicity materials supplied to dealers was also excluded from additional consideration received by the manufacturer. Consequently, the impugned order was set aside.

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Issues:
The judgment involves the challenge to Order-in-Original No. 604, dated 27-12-1988 passed by the Director General of Anti-Evasion (Central Excise), New Delhi, regarding the evasion of Central Excise Duty by a manufacturer of Motor Cycles.

PDI Charge Issue:
The appellant was alleged to have evaded duty by not including a PDI charge of Rs. 25.00 per unit in the assessable value. The charge was collected from customers through dealers for pre-delivery inspection. The Tribunal held that the PDI charge cannot be included in the assessable value as it is an activity carried out by dealers after title passes to them, not having a direct nexus with the manufacturer or marketability.

Advertisement Expenses Issue:
The controversy also involved the manufacturer collecting advertisement expenses and cost of publicity materials from dealers. The Tribunal noted that the manufacturer spent about Rs. 82 lakhs on advertisement, recovering about Rs. 17 lakhs from dealers. Citing a Supreme Court case, it was held that the share of advertisement expenses borne by dealers should not be added to the assessable value as the campaign benefitted both the dealers and the manufacturer equally.

Publicity Materials Issue:
Additionally, the appellant supplied publicity materials to dealers and recovered the cost from them. The Tribunal determined that the cost of these materials should not be considered as additional consideration received by the manufacturer for the Motor Cycles sold to dealers. Therefore, it was concluded that such cost should not be included in the assessable value.

In conclusion, the impugned order was set aside, and the appeal was allowed based on the findings related to the PDI charge, advertisement expenses, and publicity materials issues.

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