Hercules Hoists Ltd vs Commissioner Of Central Excise, ...

(Arising out of Orders-in-Appeal No. AT/376/M-III/2007 dated 3.10.2007, No. SRK/283/M-III/2008 dated 12.5.2008, No. YDB/123/M-III/09 dated 29.10.2009 and No. PKS/219-220/BEL/2010 dated 23.7.2010 all passed by Commissioner of Central Excise (Appeals), Mumbai-III)

For approval and signature:

Honble Mr. P.K. Jain, Member (Technical) and Honble Mr. Ramesh Nair, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :

CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

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Hercules Hoists Ltd. Appellant Vs. Commissioner of Central Excise, Mumbai-III Respondent

Appearance: Shri M.S.A. Mir, Advocate, for appellant Shri N.N. Prabhudesai, Superintendent (AR), for respondent

CORAM: Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

Date of Hearing: 19.3.2015 Date of Decision: 19.3.2015

ORDER NO

Per: P.K. Jain

Brief facts of the case are that the appellant is engaged in the manufacture of material handling equipment bearing their brand name i.e. INDEF. On an enquiry, it was revealed that the goods manufactured by the appellant were being marketed during the period 1.7.2000 to 31.3.2004 by one M/s. Indef Marketing Services Ltd. (hereinafter referred to as IMSL), who was a 100% subsidiary company of the appellant and later on, the said subsidiary was merged with the appellant. The appellant/IMSL had appointed a network of authorized marketing associates known as AMAs, spread across the country. The AMAs in turn appoint dealers in their respective territory. Such dealers sell the goods manufactured by the appellant. Sometimes the dealers give advertisement which primarily projects them as the dealer in the appellants goods. As per the business policy followed by the appellant, 50% of the expenses incurred in such advertisement is reimbursed to the dealer by the appellant. Sometimes even the appellant negotiates with certain companies like Tata, Yellow Pages, to include the advertisement on behalf of various dealers. Even in respect of such advertisement, 50% of the cost is borne by the appellant and 50% is recovered from the dealers. Revenues case is that the 50% of the amount reimbursed by the appellant will form part of the transaction value and, therefore, the appellant is required to pay excise duty on the said amount.

2. The learned counsel for the appellant submits that all the AMAs/dealers are not giving advertisement and the price charged by them for every item in both cases remains the same, i.e. the price charged by them is uniform, irrespective of the fact whether the concerned AMA is advertising or not. The learned counsels other submission was that giving advertisement etc. is not a pre-condition to the sale. Further, advertisements are not for their goods alone rather the advertisement projects a particular AMA/dealer as the persons dealing in the goods manufactured by the appellant. Such advertisement promotes the business of the dealer/AMAs. Increase in the appellants business is consequential to the increase in the business of the dealer/AMA. Thus, it cannot be said that the advertisement is for the goods manufactured by them. Advertisements are for the dealers indicating that they deal in the appellants goods. The learned counsels another submission was that the Revenue has raised the demand on the amount disbursed by the appellant. The amount which has been disbursed by the appellant is from the amount recovered by the appellant by selling the goods and, therefore, this amount cannot be considered as an additional consideration and cannot be taxed twice. The learned counsel also submitted that the issue has been decided by the various judgments in the past and the change in the valuation law from 2000 onwards does not make any difference.

3. The learned AR, on the other hand, submits that from 2000 onwards, Section 4 has undergone change and as per the new section, transaction value has to be taken, which can vary from buyer to buyer. In view of the changed situation, the fact that the appellant is selling the goods at the same price to an advertising AMA and to non-advertising AMA, is irrelevant. Further, new Section 4(3)(d) defines the transaction value and includes any amount relating to advertisement or publicity. The learned AR further submitted the following case laws to support his contention.

(i) Maruti Suzuki India Ltd. vs. CCE, Delhi reported in 2011 (274) ELT 539 (Tri.-Del.);

(ii) DCM Engg. Products vs. CCE, Jalandhar reported in 2011 (268) ELT 396 (Tri.-Del.);

(iii) Maruti Suzuki India Ltd. vs. CCE, Delhi-III reported in 2010 (257) ELT 226 (Tri.-LB);

(iv) Voltas Ltd. vs. CCE, Hyderabad reported in 2005 (205) ELT 432 (Tri.-Bang.);

(v) CCE vs. Fiat India Pvt. Ltd. reported in 2012 (283) ELT 161 (SC).

4. We have considered the submissions made by both the sides. We find that Section 4(3)(d) of the Central Excise Act defines transaction value as under:-

(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.

4.1 As per the said definition, 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, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses etc. Thus, if any amount is spent by AMA or dealer for advertisement or publicity, the same will form part of the transaction value. However, in the present case, we note that AMAs are not advertising the goods per se but what they are doing is to put an advertisement such as in Yellow Pages and in other places like bill-board so as to indicate that they are dealers of INDEF equipment. The appellant has produced copy of certain advertisements which have been made in the Yellow Pages or the bill board which have been put on the sides of the road. Some of these are reproduced below:-

4.2 From these advertisements, it is clear that the advertisements are mainly to the effect that a particular dealer deals in the product of the appellant. Thus, these advertisements cannot be called as advertisements for the manufactured goods but are advertisements of the dealer. Undoubtedly, such advertisement indirectly helps the appellant and it is for this reason that they are reimbursing 50% of the expenses.

5. We also note that the Revenue has demanded the duty on the amount reimbursed by the appellant to the dealers and not the amount spent by the dealer. The amount reimbursed by the dealer is not additional consideration. On the contrary, this is an amount which is paid by the appellant to its dealer out of the sale proceeds or the value already recovered or to be recovered by the appellant from its AMAs/dealers. Thus, the said amount cannot be considered as additional consideration.

6. We have also gone through the judgment quoted by the learned AR. These judgments do not cover the situation in the present case and are, therefore, distinguishable. We do not consider it necessary to discuss these judgments.

7. In view of the above findings, the appeals filed by the appellant are allowed.

(Operative part pronounced in Court)

(Ramesh Nair) Member (Judicial) (P.K. Jain) Member (Technical)

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