Monday, November 29, 1999

Add exp by dealer can``t be included in cost of product: CESTAT

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New Delhi, June 18 (PTI) In a relief to Royal Enfield, makers of Bullet motorbike, a tax tribunal has ruled that the expenditure incurred voluntarily on advertisements by dealers can''t be included in the cost of the product for the purpose of levying excise duty. The CESTAT (Customs, Excise & Service Tax Appellate Tribunal), Chennai, passed the order on the plea of Enfield challenging the decision of the Commissioner of Excise that money spend on promotional activities would add to the production cost. Accepting the contention of the bike maker, the Tribunal said part of the expenditure not reimbursed by the manufacturer company would not be taken into consideration for duty determination. "We hold that the advertisement expenses incurred by the dealers, which is not reimbursed by the appellants (company) is not required to be included in the assessable value, as the advertising has been done by the dealers on voluntary basis," a bench headed by Jyoti Balasundaram said. The tribunal set aside the order of the Commissioner of Central Excise, Chennai, that the expenditure on the sales promotion forms part of cost of the product. The company Royal Enfield, manufacturer of motor cycles of various models including Bullet, had contended that the advertisement is done by dealers on the local basis and it adds sales to them. The dealers do so without any agreement and expenditures are not reimbursed by the company, Royal Enfield contended. The Excise Department on the other hand contended that such part of the advertisement expenditure, which is not reimbursed by the company, also forms part of cost of products as it benefits to the company.

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