2008 (10) TMI 456 - AT - Central Excise

Summary

Issues:
Interpretation of the term "transaction value" under Section 4(3)(d) of the Central Excise Act regarding charges for pre-delivery inspection and after-sale-services in the assessable value of cars.

Analysis:
The case involves a dispute over whether charges for pre-delivery inspection and after-sale-services provided by dealers should be included in the assessable value of cars under the definition of "transaction value" in Section 4(3)(d) of the Central Excise Act. The Commissioner had included these charges in the assessable value, leading to a duty demand. The appellant argued that these charges should not be included based on a previous decision in their favor. The key issue is the interpretation of the term "transaction value" and whether expenses towards servicing and warranty should be part of it.

The definition of "transaction value" in Section 4(3)(d) includes any amount that the buyer is liable to pay to or on behalf of the assessee in connection with the sale, which could encompass charges for servicing and warranty. The Commissioner's decision to treat these charges as part of the assessable value appears prima facie correct based on this definition. However, the appellant relied on a previous decision where it was held that charges not flowing directly or indirectly to the assessee should not be included in the assessable value. This interpretation was based on Rule 6 of the Valuation Rules, which requires the addition of the money value of any additional consideration flowing from the buyer to the assessee. Since the charges for pre-delivery inspection and after-sale-services did not flow to the assessee, it was argued that they should not form part of the assessable value.

The Department's appeal against the previous decision was dismissed by the Supreme Court on grounds of delay, not on merits. Due to the conflicting views, the Tribunal referred the matter to a Larger Bench to decide whether charges for pre-delivery inspection and after-sale-services should be included in the assessable value of cars as per the definition of "transaction value" in Section 4(3)(d). Pending the appeal decision, the Tribunal waived the pre-deposit of dues and stayed the recovery of the amount. The case was scheduled to be placed before the President for the constitution of a Larger Bench for further deliberation on the issue.

In conclusion, the case revolves around the interpretation of the term "transaction value" and the inclusion of charges for pre-delivery inspection and after-sale-services in the assessable value of cars under the Central Excise Act. The conflicting views necessitated a referral to a Larger Bench for a final decision on this issue.