Judgment:
1. The short point to be considered in this case is to what extent it is to included the advertising expenses incurred by the dealers.
2. Shri Sridharan submitted that the appellants are engaged in manufacture of tractors. The appellants marketed the tractors through the network of 250 dealers all over the country. The dealers are independent buyers and not related persons and it is not even the case of the department that buyers are related persons of the appellants.
The appellants met usual expenditure towards advertisements in the form of press releases, radio and television and such expenses were fully borne by the Company. Apart from this, the dealers of their own volition and to promote their own agency, want and effect promotional publicity to their agency in the form of hoardings/paintings in their respective territory. In such cases the cost of advertisement met by the respective dealers is shared by the assessees to the extent of 50% of such cost. Case of the department is entire cost of expenses towards advertisement is to be included, to the assessable value. He submitted that 50% advertisement expenses met by the assessee has already been included in the assessable value and since the dealers were also benefited by such advertisement for promotion of sales 50% of such expenses cannot to be included as it is nothing held with the product manufactured by the assessee. In other words, the dealers were directly benefited by such advertisement. He referred to the decision of the Tribunal in the case of Hero Honda Motors Ltd. v. Collector of Central Excise, New Delhi, reported in 1997 (19) RLT 842 (CEGAT-SB) wherein it was held that, the advertisement through newspaper media, cinema slides and the like was basically for the manufacturer and the finished product. The name of the dealers were to be furnished in these materials. This could certainly go to enhance the goodwill of the dealers. It is not unknown for dealers to advertise their business activities so as to attract more customers and to enhance their business. When they do so and in the absence of anything else on record, it cannot be said that the cost of such advertisement which also in a way enchan-ces the marketability of the product should be added to the assessable value.
3. He also referred to the advertisement material in which the dealers names were specifically mentioned therein. Reliance also has been placed by him in the case of Raymond Woollen Mills v. C.C.E., Pune, reported in 1997 (20) RLT 251 (CEGAT-SB). It was held therein that since transactions between appellants and dealers were on principal to principal basis and some dealers only incurred advertisement expenses that too party cannot be added to the assessable value. Following the ratio of the earlier decisions including the decision of the Supreme Court in the case of Phillips India Ltd. v. Collector of Central Excise, Pune, 4. Heard Shri K. Srivastava who justified the action of the department in adding the cost of advertisement expenses incurred by the dealer. He also submitted that the advertisement expenses is inclusive of gifts such a key chain, ball pen etc. on the analogy that trade discount in the form of gift cannot be claimed as deduction. The advertisement expenses incurred in the form of gifts has to be included in the assessable value.
5. We have carefully considered the matter. In this case the cost of the advertisement expenditure is shared by the assessee and the dealers. In the case of Phillips India Ltd. referred to above, the Supreme Court has observed that the cost of the advertisement shared by the assessee and with the dealer and both were benefited, the benefit which is attributed to the dealer and to that extent cannot be included in the assessable value of the assessee. In the instant case, it is clear that both the assessee and dealer were benefited by such advertisement and the share incurred by the assessee to the extent of 50% has already been included in the assessable value. The dealer who was also benefited by such advertisement by insertion of his name in the advertisement material and expenses shared by him and to that extent it cannot be included in the assessable value of the product manufactured and cleared by the assessee. Following the ratio of the decisions referred to above we accept the contention of the assessee and in the result, appeal is allowed with consequential relief, if any.