2013 (12) TMI 114 - AT - Central Excise

Inclusion of cost of pre delivery inspection (PDI) and free after sales services to assessable value of the vehicles sold - Held that - Following M/s. Tata Motors Ltd. Versus Union of India & Others 2012 (9) TMI 244 - BOMBAY HIGH COURT - As and when the car is removed out of the factory Excise duty is payable - The assessable value has to be determined u/s 4(1)(a) of the central excise act as amended - the assesses and the dealers were not related to each other and the price was the sole consideration Thus the value to be taken up for the purposes of Excise duty is the transaction value. A dealer is required to carry out Pre Delivery Inspection as well as said services in regard to a car which is sold to a customer - a dealer is required to pay an amount to the assessee towards the cost of the car and a dealer cannot charge more than the amount specified by the assessee - The difference between the price so fixed by the assessee and the price paid by the dealer constitutes what is called as dealer s margin - A dealer has to spend money to conduct PDI as well as render said services - the dealer is required to perform PDI as well as said services as a part of the dealer s responsibility cast on him as per the dealership agreement. In all cases where the expenses incurred towards PDI and said services are solely borne by the dealer and the manufacturer have nothing to do with the said expenses then adding those expenses in the assessable value would be contrary to the provisions of Section 4(1)(a) r/w Section 4(3)(d) of the Central excise Act - Revenue have not been able to place on record any material to show that the amount incurred towards PDI and said services can fall within the definition of the transaction value - Thus as per Section 4(3)(d) of the Central Excise Act 1944 the PDI and free after sales services charges can be included in the transaction value only when they are charged by the assessee to the buyer Decided against Revenue.

Summary

Issues:
The issue involves the applicability of transaction value under Sec. 4(1)(a) of the Central Excise Act 1944, specifically regarding Predelivery Inspection (PDI) and Free Service Coupon (FSC) charges for the period from 1.7.2000 to 31.3.2001. The key question is whether these charges provided free by the dealer on behalf of the assessee should be included in the assessable value for the purpose of duty payment.

Detailed Analysis:

1. Applicability of Transaction Value:
The appellant argues that the Commissioner of Customs & Central Excise (Appeals) erred in setting aside the lower authority's order regarding the inclusion of PDI and FSC charges in the assessable value. The appellant contends that the introduction of a new Section 4 in the Central Excise Act in 2000 changed the concept of valuation of excisable goods to individual transaction value. The transaction value includes any amount payable by the buyer to the assessee in connection with the sale, excluding excise duty and other taxes. The appellant asserts that if the conditions under Sec. 4(1)(a) are not met, the assessable value should be determined under Sec. 4(1)(b) using the Valuation Rules.

2. Legal Precedents and Arguments:
The respondent cites the decision of the Hon'ble High Court of Bombay in Tata Motors Ltd., which clarified that expenses towards PDI and related services should not be included in the assessable value. The respondent also mentions a Larger Bench decision in Maruti Suzuki India Ltd. vs. Commissioner, which had a different view. The respondent argues that since the issue is settled by the High Court, the appeals should be rejected.

3. Tribunal's Decision:
The Tribunal notes that the matter is pending before the Supreme Court due to an appeal by Maruti Suzuki India Ltd. against the Tribunal's decision. However, considering the High Court's detailed decision in Tata Motors Ltd., the Tribunal deems it appropriate to decide the issue at hand. The High Court's analysis of the Circulars issued by the Board supports the exclusion of PDI and FSC charges from the assessable value. The Tribunal, therefore, rejects the department's appeals based on the settled position by the High Court.

In conclusion, the Tribunal's decision aligns with the interpretation provided by the High Court of Bombay, which clarified that expenses related to PDI and free after-sales services should not be included in the assessable value. The Tribunal's decision is based on the settled legal position and the detailed analysis conducted by the High Court, leading to the rejection of the department's appeals.