2003 (9) TMI 786 - AT - Central Excise

Summary

Issues Involved:
1. Demand for Rs. 108.47 crores on sales made from the depot.
2. Demand of over Rs. 45 crores on account of after-sales service charges, pre-delivery inspection charges (PDI), and warranty charges.
3. Interest and penalties imposed on the appellants and other individuals.

Detailed Analysis:

1. Demand for Rs. 108.47 crores on sales made from the depot:
The demand was based on the Supreme Court decision in the MRF case, where it was held that buyers at depots are different classes of buyers from buyers at the factory gate. However, in this case, the Tribunal found that dealers buying goods at the factory gate and those buying from the depots were buying goods under identical terms and conditions and dealership agreements. Therefore, the MRF decision was not applicable. The Tribunal cited the Transpek Industry Ltd. and J.K. Helene Curtis Ltd. cases, where it was held that the factory gate price should be used for goods sold through regional depots if the factory gate price is ascertainable and not disputed. The Tribunal also noted that the CBEC's circular dated 25-1-1990, which clarifies that dealers situated in different places cannot be treated as different classes of buyers, was binding on the Revenue. The Tribunal concluded that the factory gate price is applicable even for goods transferred to the regional sales depots and set aside the demand of Rs. 108.47 crores.

2. Demand of over Rs. 45 crores on account of after-sales service charges, PDI, and warranty charges:
The show cause notice alleged that the assessable value should include additional considerations such as PDI, after-sales services, and warranty charges. However, the Tribunal noted that in the appellants' own case relating to their Pune factory, it was held that such charges cannot be included in the assessable value of motor vehicles. This decision was upheld by the Supreme Court. The Tribunal also referred to other similar decisions, such as Philips India Ltd. and Mahindra & Mahindra. The Tribunal found that the appellants had not collected and retained any amount from dealers towards the price of the vehicle for PDI and warranty services. The Tribunal applied the ratio of the earlier order and set aside the demand on this account.

3. Interest and penalties imposed on the appellants and other individuals:
The interest levied under Section 11AB of the Central Excise Act and the penalty under Rule 173Q imposed upon the appellants, as well as the penalties imposed upon other individuals under Rule 198, were set aside in view of the Tribunal's findings on the above issues.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals, concluding that the demands for Rs. 108.47 crores and over Rs. 45 crores were not sustainable, and the interest and penalties imposed were also set aside.