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TaxTMI 
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2024 (7) TMI 924
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....nt:- 1997 (91) E.L.T. 540 (S.C.) PHILIPS INDIA LTD. 2017 (12) TMI 163 CESTAT MUMBAI HENKEL ADHESIVES TECHNOLOGIES INDIA P. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III 2017 (5) TMI 1388 CESTAT CHENΝΑΙ FORD INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENΝΑΙ-ΙΙΙ 2020 (2) TMI 1194 CESTAT MUMBAI COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, AURANGABAD VERSUS M/S. SKODA AUTO INDIA PVT. LTD. 2016 (11) TMI 822- CESTAT CHANDIGARH MARUTI SUZUKI INDIA LTD. VERSUS C.C.E. -DELHI-III 2018 (11) TMI 345 CESTAT KOLKATA COMMISSIONER OF CENTRAL EXCISE, JSR VERSUS M/S TATA STEEL LTD. 2004 (4) TMI 81 - SUPREME COURT COMMISSIONER OF CENTRAL EXCISE, SURAT VERSUS SURAT TEXTILE MILLS LTD. 3. Shri Rajesh R Kurup, Learned Superintendent (AR), appearing on behalf of the Revenue, reiterates the findings of the impugned order. 4. On careful consideration of the submissions made by both the sides and perusal of the record, we find that for the period prior to new Section 4 and Valuations Rules,2000 there are judgments of the Hon'ble Supreme Court that the advertisement cost incurred by the dealer/ distributor will not be included ....
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....n maximising the sale of the products. The provisions in the contract between them relating to advertising and the like were in furtherance of this desire on the part of both the manufacturer and its distributor and in no way affected the real nature of the transaction which appeared to be of sale on principal to principal basis. 5. It seems to us clear that the advertisement which the dealer was required to make at its own cost benefited in equal degree the appellant and the dealer and that 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. (b) Besta Cosmetics Ltd.(supra) held that- 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 Court appears to have upheld the view that where the advertisement cost is incurred by the manufacturers/customers compulsorily or mandatorily, and where the manufacturer has an enforceable legal right against the customers to insist on incurring of such advertisement expenditu....
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....hat- "3. On a careful consideration, we notice that the Commissioner himself in para 5 has clearly noted that there is no written agreement. He draws conclusion from reply dated 9-3-2005 of the assessee, wherein they have reimbursed to few of the dealers, to come to the conclusion that there is oral agreement between the assessee and the dealers to whom reimbursement has not been done. We are not agreeable with this finding. There has to be written agreement with an enforcement clause to enforce the legal right to insist on advertisement under the agreement. In the absence of any such agreement with such a clause then in that event, the advertisement expenses incurred by the dealers on their own account cannot be added to the account of the assessee. The judgements cited by the appellant clearly apply to the facts of the case. Respectively following the ratio of the cited judgements, the impugned order is set aside and appeal allowed with consequential relief if any." 5. In of the facts of the present case which is identical to the judgments referred hereinabove, the issue is no longer res integra. Following the ratio of above judgments, we hold that 50% advertisement expense....
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....f removal thereof, wherefrom the sales occurred. The said sub-section reads as under : SECTION 4 Valuation of excisable goods for the purpose of charging of duty of excise - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be - (a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale. In the new Section 4, w.e.f. 1.7.2000, the transaction value has been defined in sub-section (2) (d) as follows : SECTION 4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - ... ... ... (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as....
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....er), of the appellant's contention that expenditure incurred by the dealers towards advertisement and publicity is optional and without any compulsion and that appellants never enforced the same, the ld. Commissioner, nonetheless concludes that appellants were having enforceable legal right against the dealer to insist on incurring of advertisement expenses on the following observations : "22. It is also contended by the notice that the activity of sale of finished goods by the notices and the activity of Advertisement & publicity by the dealer have no connection or correlation in any manner. However, I find that the expenses incurred by the dealer are part of sale which is their main activity. Though it has been argued that both the manufacturer and dealer equally benefit from the advertisement, the fact that the advertisement & publicity expenses are incurred by the dealer only to enhance the sale of the products of the manufacturer is not under dispute. The 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. 23.... ...... ...... ....
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....ments incurred by the dealers were only on behalf of M/s.FIPL." Based on this conclusion, the ld. Commissioner has held that expenditure incurred by dealers are includible in the assessable value. 5.6. Coming to the dealership agreement discussed by lower authority in para-21 of the order, as per the "Terms and Conditions of Sale" in para-8 of the Dealer Sales and Service Agreement between the appellant and the dealers, the following has been indicated :- 8. TERMS AND CONDITIONS OF SALE (a) Prices. The Dealer shall pay the Company for Company Products purchased from the Company the Dealer Price as from time to time is established by the Company, less any applicable cash or other discounts, plus any additional charges made by the Company including but not limited to : (1) distribution and delivery, (2) advertising, .... 5.7. From the facts of the matter, there is no evidence available to suggest that the appellants had made any additional charges for advertisement inextricably tied to the price to be paid for the goods cleared to the dealers. No corroboration is forthcoming or has been unearthed by Revenue to establish that the portion of advertisement charge....
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....f the Ford dealers in various regions. While the intent may be to enhance sale of Ford cars, it cannot however be denied that dealers too stand to gain and profit since such publicity will encourage potential buyers to contact them and possibly increase their own sales and profit. Viewed in this light, the lower authority's finding that impugned advertisement only benefits the appellant does not stand to reason. 5.10. Another ground relied upon by the lower authority is 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 undertaken advertising without the instructions of the appellant. This proposition would have made sense if Revenue had been able to corroborate it with evidence or for that matter, with any terms in the dealer agreement or Company's circulars issued to dealers to prove that such sharing was a compulsory one. This is certainly not the case. Motor vehicles being such high cost consumer durables and that too in a highly competitive market would doubtless require joint marketing efforts of both manufacturer and dealers for mutual benef....
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.... there is neither any obligation cast upon the dealer nor is there a right or remedy given to FIPL. At the most, the agreement to meet 100% advertisement charges and limit reimbursement only to 75%, thereby the dealer put to shoulder 25% of the advertisement charges can be considered only as an 'gentleman's agreement. In Oxford dictionary a 'Gentleman's agreement is defined as an arrangement or understanding, which is based upon the trust of both or all parties, rather than being legally binding. It is an unwritten agreement or transaction backed only by integrity of the counterparty to actually abide by the terms of the agreement. There is no legal recourse in caseof default. 7. In consequence, we have no hesitation in holding that impugned advertisement expenses cannot be termed as "extraneous consideration" to the price charged by the appellants which would require inclusion in their assessable value for the purpose of Section 4 or after 1.7.2000. So also, we hold that these expenses are not in the nature of any amount that the dealer is "liable to pay to, or on behalf" of the manufacturer by reason or in connection with the sale of motor vehicles. 8. In ar....
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....oduction as under : "10. The position in respect of unamended provision, thus, is very clear. Coming to the amendment in Section 4 of the Act, in the year 2000, it may be noted in the first instance that definition of transaction value as per Section 4(3)(d) is exhaustive and covers within its purview, the price of goods and various other amounts charged by the assessee by reason of sale or in connection with sale. This provision reads as follows : (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. " 11. The expression 'any amount ....
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.... the advertisement cost would be includible in the assessable value. Without in any fashion affirming the view taken therein it is clear even on the basis of the judgment that the clause in question gave the manufacturers/marketing agent, the discretion whether or not to advertise the assessee's products. There was no enforceable legal right with the assessee to insist on the advertisement under the agreement. 4. The appeal is, accordingly, dismissed." 9. In the light of the discussions hereinabove and also respectfully following the ratio of the case law cited supra, we have no hesitation whatsoever, to find in favour of the appellant in toto. Impugned order is therefore set aside and appeal allowed with consequential relief, if any, as per law." 4.3 Commissioner of Central Excise & Customs, Aurangabad vs. M/s. Skoda Auto India Pvt. Ltd 2020(2) TMI 1194- CESTAT Mumbai "6. The short issue for consideration is whether the advertisement charges incurred by the dealers of respondent be included in the value of Motor Cars. We find that the learned Commissioner after analyzing the Letter of Intent/dealership agreement came to the conclusion that it does not contain any enf....
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....connection with the sale' of the goods. The expression 'in connection with the sale of the goods' would only mean that but for the payment of the additional amount, the sale of the goods would not take place. When we keep in mind the aforesaid legal position, we find no error in the view taken by the Tribunal giving benefit to the assessee. Both the sides were in unison in accepting the position that no major change had been incorporated w.e.f. 1-7-2000 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." 8. Also, the Hon'ble Supreme Court in the said judgment considered the Circulars dated 1.7.2002 and other circular issued by the Board from time to time. While accepting....