Custom, Excise & Service Tax Tribunal
M/S. Honda Seils Power Products Ltd vs C.C.E. Meerut Iii on 4 September, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH, COURT NO. IV Date of Hearing/decision: 04.09.2013 Appeal No. E/1935-1936/2006- EX[DB] M/s. Honda Seils Power Products Ltd. Appellant Vs. C.C.E. Meerut III Respondent
E/Appeal No. 414/2008 M/s. Honda Motorcycles & Scooters (India) Pvt. Ltd. Appellant Vs. C.C.E. Delhi-III Respondent Appearance:-
ShB.L.Narsimhan, Advocate - for the Appellant Ms. Shweta Bector, DR - for the Respondent CORAM:
Hon'ble Ms. Archana Wadhwa, Member (Judicial) Hon'ble Sh. Rakesh Kumar, Member (Technical) FINAL ORDER NO. 57634-57636/2013 Per Rakesh Kumar The facts leading to these appeals are, in brief, as under:-
1.1 The appellant are manufacturers of Scooters and Motorcycles, chargeable to Central Excise Duty. Their sales are through their dealers. During the course of Audit of their records, it was observed that the dealers had incurred expenditure on advertisement and publicity of the appellants products and a part of these expenses had been shared by the appellants, but the advertisement and publicity expenses to the extent, borne by the dealers, were not included in the assessable value of the goods cleared by the appellants to the dealers. It was also found that in term of the appellants agreements with their dealers, the dealers were required to make efforts for promoting the sales of the products of the appellants. On enquiry by the Department, the appellants accepted that the dealers had incurred expenditure on advertisement and publicity, a part of which was being re-imbursed by them to the dealers. The Department was of the view that to the extent the dealers were bearing the advertisement and publicity expenses, the same must be included in the assessable value of the goods cleared by the appellants to the dealers. It is on this basis that in case of M/s. Honda Seils Powers Products Ltd., two duty demands of Rs. 20,61,226/- for the period from Aparil2000 to Nov.03 and of Rs. 14,61,616/- for the period from April04 to March08 were confirmed along with interest with imposition of penalty of equal amount under section 11AC vide orders passed by the Assistant Commissioner. On appeals being filed to C.C.E (Appeals), the Assistant Commissioners Order were upheld vide order-in-appeal No. 49-50-CE/MRT-II/2006 dt. 13.03.2006. Against this order of the Commissioner (Appeals) the appeal No. E/1935-1936/2006 have been filed.
1.2 On the same ground, the duty demand of Rs. 3,67,52,896/- for the period of Feb.02 to Dec.06 was confirmed against M/s. Honda Motorcycle & Scooters (India) Pvt. Ltd. by Commissioner of Central Excise, Delhi-III vide order-in-original dt.07.12. By this order in addition to duty demand, interest on duty under section 11AB, was also demanded and besides this, penalty of equal amount was imposed under section 11AC. Against this order of the Commissioner, the Appeal No. E/414/2008 has been filed.
2. Heard both the sides.
3. Sh. B.L. Narsimhan, learned counsel for the appellants, pleaded that in this case the dealers as sales promotion activity by them, had incurred advertisement expenses, a part of which had been reimbursed by appellants, that the point of dispute is as to whether the advertisement and publicity expenses incurred by the dealers which, were not reimbursed to them by the appellant, are to be add to assessable value, of the goods, that this issue stands decided in the appellants favour by judgments of Tribunal in cases of Roots Industries Ltd. Vs. Commissioner of Central Excise, Coimbatore, reported in 2012(284) ELT-687 (Tri. Chennai); TVS Motors Company Ltd. Vs. Commissioner of Central Excise,Chennai, reported in 2008 (229)ELT-559(Tri.Chennai); Amco Batteries Ltd. Vs. Comm. of Central Excise, Bangalore, reported in 2007(207) ELT-612(Tri. Bang.); Commissioner of Central Excise, Delhi vs. Escorts Ltd., reported in 2002(145) ELT-312(Tri.-Del.), the civil appeal by Government against which was dismissed by Apex Court vide judgment reported in 2004 (158) ELT- A-42(SC) and the Apex Courts judgment in the case of C.C.E., Surat Vs. Surat Textile Mills Ltd. Reported in 2004 (165) ELT-176 (SC) wherein it has been held in clear terms that advertisement expense incurred by a manufacturers customers (Dealers) can be added to the assessable value only if the manufacturer has enforceable legal right against the Customers(Dealers) to insist on incurring of such expenditure by them, that same view has been taken by the Tribunal in case of Maruti Suzuki India Ltd., reported in 2008(232) ELT-566(Tri.Del.) wherein it was held that only when the contract between the manufacturer and dealer envisages incurring of certain expenses by the dealers on advertisement and failure to incur such expenses on advertisement gives a right to the manufacturer to get the advertisements done of his own and recover the expenses from the dealer, the advertisement expenses incurred by the dealer can be added to the assessable value, that in this case there is nothing in the appellants agreements with their dealers from which it can be concluded that the appellants had enforceable legal right to get certain quantum of expenses incurred by the dealers on advertisement of their products, and that in view of this, the impugned orders are not sustainable.
4. Ms. Shweta Bector, learned Departmental Representative, defended the impugned orders by reiterating the findings of Commissioner and emphasized that the appellants agreements with their dealers had clauses which required the dealers to make all possible efforts to promote the sales of the appellants products and, hence, it is clear that appellants had enforceable legal right to require the incurring of advertisement expenses by the dealers.
5. We have considered the submissions from both the sides and perused the records. The un-disputed facts are that:-
(a) the appellants agreements with their dealers only have a clause which require the dealers to make efforts for promoting the sales of the appellants products; and
(b) during the period of dispute, the dealers had incurred expense on advertisement and publicity, a part of which had been reimbursed by the appellants to the dealers.
The point of dispute is as to whether the expenses on advertisement and publicity expenses incurred by the dealers, which were borne by them, are to be added to the assessable value of the goods or not. On this point, it is seen that the Apex Court in case of C.C.E., Surat Vs. Surat Textile Mills Ltd., reported in 2004(167) ELT-379 (S.C.) has held in clear terms that only when a manufacturer has enforceable legal right against his customers/dealers to insist on incurring of expenses on advertisement, the advertisement expense incurred by the dealers can be added to the assessable value. Same view has been taken by the Tribunal in case of Maruti Suzuki India Ltd., reported in 2008(232) ELT-566(Tri.Del.)
6. On going through the appellants agreements with their dealers, we find that there is nothing in their agreements from which it can be concluded that appellants had enforceable legal right against the dealers to insist on incurring of certain amount of expenses on advertisement and publicity of the appellants products. Just a Clause in the agreements requiring the dealers to make efforts for promoting sales of the appellants products can not be treated as a clause imposing legal obligation on the dealers to incur certain level of expenses on advertisement. In view of this, we held that the impugned orders are not sustainable. The same are set aside. The appeals are allowed.
(Operative portion of the order pronounced in the court) (Archana Wadhwa) Member (Judicial) (Rakesh Kumar) Member(Technical) S.Kaur 1