[Citation: M/s Rathi Transpower Pvt. Ltd. v. Commissioner of Central Excise, Pune-III]

[Date of hearing- February 03, 2016 and date of decision February 10, 2016]

BRIEF FACTS

The Appellant is engaged in the manufacture of excisable goods and selling the products to various distributors and dealers. The Appellants entered into an agreement with some of the dealers and distributors in which they were sharing the cost of advertisement on optional basis.

A Show Cause Notice was issued to the Appellant seeking to add the amount recovered from the dealers in respect of the advertisements cost to the assessable value.

The demand was confirmed by the lower authorities on the ground that the transaction value as defined under Section 4(3) (d) of the Central Excise Act, 1944 includes cost of advertisements or publicity.

Aggrieved by the said order, the Appellant filed an appeal before the Hon’ble Tribunal.

APPELLANT’s SUBMISSIONS

The Appellant relied on the clauses of the agreement to assert that the advertising and publicity material taken by the dealers is purely on their own option. The Appellant is in fact giving the said material to the dealers at 50% of the cost. It was argued that sharing of cost is only subject to the requirement of the advertising material by the dealers and it happens only in respect of few of the dealers.

The Appellant relied on the decision of Hon’ble Supreme Court in the case of Philips India Ltd.1997 (91) ELT 540 (SC). He also relied on the decision of the Tribunal in case of Ford India Pvt. Ltd. 2007 (216) ELT 530 (Tri-Chennai) and Maruti Suzuki India Ltd. 2008 (232) ELT 566 (Tri-Del).

“It was held that in all these decisions that unless cost of advertising is recovered from the dealers mandatorily as a condition of dealership, the same cannot be added to the assessable value”.

TRIBUNAL’s ORDER

After going through the rival contentions, the Hon’ble Tribunal observed that the terms of agreement it is very clear that it is an option to the dealer to obtain advertising materials from the appellant at 50% of the cost. It is not disputed that only some of the dealers are availing these option. That being so, it can safely be concluded that it is not mandatory for the dealers to take the advertising materials from the Appellant and to share the cost of such materials.

In these circumstances, the Hon’ble Tribunal decision in case of Maruti Suzuki India Ltd. becomes squarely applicable. Respectfully following the ratio of the Maruti Suzuki India Ltd. decision, the Appeal was allowed by the Tribunal.

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