Kapadia, J. - (1.) The 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.
(2.) M/s. Bajaj 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.
(3.) 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 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. 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 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.;