COLLECTOR OF CENTRAL EXCISE, PUNEversusM/S. BAJAJ TEMPO LTD.

                                                                                      I




A                 COLLECTOR OF CENTRAL E:'::CISE, PUNE
                                   v.
                        MIS. BAJAJ TEMPO LTD.

                               FEBRUARY 7, 2005

B    [S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.)


          Central Excise Act, 1944-Section I IA (/)-Reimbursement of
    advertisement expenses initially incurred by manufacturer from dealers-
C   Whether includible in the assessable value under extended period oflimitation-
    Collector holding it to be includible-Tribunal applying certain decisions and
    without discussing evidence, setting aside the order-On appeal, held: Decisions
    applied by the Tribunal does not pertain to the mailer in issue and as such
    Tribunal wrongly applied the decisions-Hence, order of Tribunal and that of
    adjudicating authority set aside-Matter remitted back to Adjudicating
D   Authority for fresh decision-Precedent-Wrong application of

          Respondent - assessee is a manufacturer of motor vehicles. Appellant
    - Department issued show cause notice to the assessee demanding duty on
    the advertisement expenses initially incurred by the assessee and
    subsequently reimbursed from the dealers since such reimbursement is
E   includible in the assessable value. It invoked extended period of limitation
    since the assessee did not disclose to the Department about the
    reimbursement of expenses. Adjudicating Authority upheld. the demand
    holding that the advertisement expenses were incurred by the assessee and
    charged to the dealers in addition to expenses incurred by the assessee
F   and as such were includible in the assessable value. Assessee filed an
    appeal. Tribunal allowed the appeal, applying the ratio in Philips India
    ltd v. Collector of Central Excise, Pune and Mahindra & Mahindra ltd v.
    Collector of Central Excise, Bombay, without discussing the evidence on
    record. Hence the present appeal.

G        Allowing the appeal and remitting the matter to the Adjudicating
    Authority, the Court

         HELD: In the instant case, the fundamental point is whether the
    reimbursements claimed by the manufacturer are includible in the
    assessable value and whether such reimbursement would constitute
H                                       1118
                      C.C.E. v. BAJA.I TEMPO LTD. [KAPADIA, .I.]              1119
     "advertisements by the dealers on their own account" or whether they             A
     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. and
     Mahindra & Mahindra ltd. Thus, the Tribunal was wrong in applying the
     decisions to the facts of the instant case. Hence, the impugned judgments        B
,,   of the Tribunal as well as of the Adjudicating Authorn:y afe set aside and
'    the matter is remitted back to the Adjudicating Authority for fresh
     decision in accordance with law. [1121-H; 1122-A-B; 1122-CJ

          Philips India ltd. v. Collector of Central Excise, Pune, (1997) 91 ELT
     540 and Mahindra & Mahindra ltd v. Collector of Central Excise, Bombay,          C
     (1998) I 03 EL T 606, distinguished.

           CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3840of1999.

          From the Judgment and Order dated 9.3.1999 of the Central Excise
     Custom and Gold (Control) Appellate Tribunal, New Delhi in A.No. E/1125/         D
     91-A in F.O. No. 320 of 1999-A.

          K.P. Pathak, Additional Solicitor General, G. Umapathy, P.
     Parmeswaran, S. Gowthaman and B. Krishna Prasad him for the Appellant.

          S. Ganesh, Thomas Vellapally, P. Venugopal, P.S. Sudheer and K.J.           E
     John for the Respondent.

           The Judgment of the Court was delivered by

           KAPADIA, J. The short question which arises for determination in this
     civil appeal filed by the Department under section 35L(b) of the Central         F
     Excise Act, 1944 is - whether reimbursement of advertisement expenses by
     the manufacturer from the dealers, after initially incurring the same, 1s
     includible in the assessable value.

           Mis Bajaj Tempo Ltd., the respondent herein is engaged in the
     manufacture of motor vehicles falling under Chapter 87 of Central Excise         G
     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    H
    1120                     SUPREME COURT REPORTS                    [2005] I S.C.R.

A 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
B   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 I IA(!) of the Central Excise Act, 1944 (hereinafter refc;,rred
    to for the sake of brevity as "the 1944 Act"), as it stood at the material time.
c        Vide reply dated 20.12.1989, the assessee denied the aforestated charges
  levelled against it in the show-cause notice. The assessee 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
D 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
E 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. According 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
F 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
G 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. Oh 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 I IA(!) of the 1944 Act.
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                C.C.E. v. BAJAJTEMPO LTD. [KAPADIA, J.]                 1121
      By order dated 29.4.1991, the Additional Collector (hereinafter referred   A
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       B
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. According to the Adjudicating
Authority, such expenses incurred by the assessee constituted additional
consideration. According to the Adjudicating Authority, such additional          C
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 show-cause notice.

      Aggrieved by the order passed by the Adjudicating Authority, the D
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 E
covered by the judgments of this Court in Philips India Ltd v. Collector of
Central Excise, Pune, reported in (1997) 91 EL T 540 and Mahindra &
Mahindra Ltd. v. Collector of Central Excise, Bombay, reported in (1998)
I03 EL T 606. Hence, this civil ap_peal by the department.

      At the outset, we may point out that there is conceptual difference p
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 G
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 ohime
from the date of the advertisement. The fundamental point however in the
present case is whethe; such reimbursements by the manufacturer are includible H
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    I 122                  SUPREME COURT REPORTS                   (2005] I S.C.R.

A 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
B   & Mahindra Ltd (supra). The Tribunal was wrong in applying the aforestated
    two decisions to the facts of the present case.

         For 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
C 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.

    N.J.                                                         Appeal allowed.