of Central Excise, Pune Vs. M/S Bajaj Tempo Ltd  Insc 85 (7 February 2005)
Variava, Dr. Ar. Lakshmanan & S.H. Kapadia Kapadia, J.
short question which arises for determination in this civil appeal filed by the
Department under section 35L(b) of the Central Excise Act, 1944 is whether
reimbursement of advertisement expenses by the manufacturer from the dealers,
after initially incurring the same, is includible in the assessable value.
Tempo Ltd., the respondent herein is engaged in the manufacture of motor
vehicles falling under Chapter 87 of Central Excise Tariff Act, 1985. On
18.10.1989, show-cause notice was issued to M/s Bajaj Tempo Ltd. (hereinafter
referred to for the sake of brevity as "the assessee") by the department
demanding Rs.4,73,690.76 for the period 1984-85 to 1988-89 by invoking extended
period of limitation. In the show-cause notice, it was alleged by the
department that the assessee had failed to disclose and had failed to pay
appropriate duty on the expenses incurred on its publicity/advertisement which
in turn promoted the marketability of the goods. In the said notice, it was
further alleged that the dealers' commission included the cost of selling the
product, the cost of meeting the service obligations to the customers, the cost
of advertisement and cost of sales promotions. In the said show-cause notice,
it was further alleged that the assessee had recovered from its dealers part of
the advertisement expenses, initially incurred by the assessee which was not
disclosed to the department and, therefore, the department was entitled to
invoke the extended period of limitation under the proviso to section 11A(1) of
the Central Excise Act, 1944 (hereinafter referred to for the sake of brevity
as "the 1944 Act"), as it stood at the material time.
reply dated 20.12.1989, the assessee denied the aforestated charges levelled
against it in the show-cause notice.
contended that its price-list was approved and consequently, the department was
not entitled to invoke the extended period of limitation; that the assessee had
recovered advertisement expenses from its dealers only in cases where the assessee
had initially incurred such expenses on behalf of the dealers and at the
request of the dealers. It was further submitted that all the expenses incurred
by the assessee towards advertisement were already included in the assessable
value. It was further submitted that the question of including such expenses on
account of advertisement would only arise if the assessee had claimed deduction
and since the assessee had not claimed deduction for such expenses, the
department was not entitled to include such expenses in the assessable value.
to the assessee, the said advertisement charges were incurred by the dealers on
their own account and, therefore, such charges were not includible in the
assessable value. It was further submitted that in any event, the goods in
question have been sold to all the dealers at the same price and all the dealers
were treated equally and, therefore, such charges were not includible in the
assessable value. It was further submitted that the correct manner to assess
excisable goods was to ascertain whether there was any allied activity or
whether there was any implicated activity. It was contended that any profit
accruing to the manufacturer in any allied activity cannot be subjected to levy
of excise duty. It was urged that in the present case the assessee had given
video cassettes to the dealers which was the allied activity and, therefore,
recovery made on this account by the assessee from the dealer cannot be
subjected to duty of excise. On the question of limitation, it was submitted
that there was no suppression of facts and, therefore, the department was not
entitled to invoke the proviso to section 11A(1) of the 1944 Act.
order dated 29.4.1991, the Additional Collector (hereinafter referred to for
the sake of brevity as the "Adjudicating Authority") found that the assessee
had incurred advertising charges initially and had got themselves reimbursed
through debit notes which were not disclosed by the assessee to the department
at the time of approval of the price-list. The Adjudicating Authority further
found that the assessee was undertaking advertisement in national and regional
papers on behalf of the dealers for which the assessee used to charge the
dealers for such expenses over and above the wholesale margin allowed to the
dealers. According to the Adjudicating Authority, these facts were evident from
the debit notes.
to the Adjudicating Authority, such expenses incurred by the assessee
constituted additional consideration.
to the Adjudicating Authority, such additional consideration was incurred by
the assessee and charged to the dealers in addition to expenses incurred by the
dealer on their own and, therefore, such charges were includible in the
assessable value. Accordingly, the Adjudicating Authority confirmed the
by the order passed by the Adjudicating Authority, the assessee preferred
appeal No.E/1125/94-A to the Customs, Excise & Gold (Control) Appellate
Tribunal, New Delhi (hereinafter referred to for the
sake of brevity as "the Tribunal"). By the impugned judgment and
order dated 09.3.1999, which is a cryptic order, the Tribunal without
discussing the evidence on record allowed the appeal on the ground that the
matter was covered by the judgments of this Court in Philips India Ltd. v.
Collector of Central Excise, Pune reported in [1997 (91) ELT 540] and Mahindra
& Mahindra Ltd. v. Collector of Central Excise, Bombay reported in [1998
(103) ELT 606]. Hence, this civil appeal by the department.
outset, we may point out that there is conceptual difference between
"expenses" and "reimbursement". This difference has not
been taken into account by the Tribunal. In the present case, it appears from
the decision of the Adjudicating Authority that the Company had initially
incurred advertisement expenses which expenses were subsequently reimbursed by
them from their dealers. It is not clear from the decision of the Adjudicating
Authority as to at what stage the reimbursement took place. It is not clear
from the decision of the Adjudicating Authority as to whether the reimbursement
was at the end of the year by way of adjustment of accounts or whether the
reimbursement had taken place within a short interval of time from the date of
the advertisement. The fundamental point however in the present case is whether
such reimbursements by the manufacturer are includible in the assessable value
and whether such reimbursement would constitute "advertisements by the
dealers on their own account" or whether they would fall in the category
of "advertisements solely made by the assessee on their own account"
for computing the assessable value. These questions were not the subject matter
of the decisions in Philips India Ltd. (supra) and Mahindra & Mahindra Ltd.
(supra). The Tribunal was wrong in applying the aforestated two decisions to
the facts of the present case.
the aforestated reasons, the appeal is allowed; the impugned judgments and
orders of the Tribunal as well as of the Adjudicating Authority are set aside
and the matter is remitted to the concerned Adjudicating Authority for fresh
decision in accordance with law, both on merits as well as on the point of
limitation. However, in the facts and circumstances of this case, there will be
no order as to costs.