2014 (4) TMI 800 - AT - Central Excise

Valuation of goods - Inclusion of Pre-Delivery Inspection (PDI) and free after sales service(FASS) charges in the assessable value of the vehicles manufactured and sold by the appellant to their dealers - Held that - Larger Bench elaborately examined the scope of transaction value defined under Section 4(3)(d) of the Act and took the view that PDI and FASS charges were includible in the transaction value of the motor vehicles sold by the manufacturer to dealers irrespective of whether such charges were collected from the buyers. But, prima facie, this view taken by the Larger Bench in 2010 is seen impliedly overruled by the Hon ble High Court in the case of Tata Motors Ltd. (2012 (9) TMI 244 - BOMBAY HIGH COURT). Therefore, for the present purpose, we are unable to follow the Larger Bench decision and would like to follow the ruling of the Hon ble High Court, which is clear enough - Stay granted.

Summary

Issues: Valuation dispute involving inclusion of PDI and FASS charges in assessable value of vehicles, waiver and stay application for adjudged dues.

Valuation Dispute:
The case involved a valuation dispute where the adjudicating authority included "Pre-Delivery Inspection" (PDI) and "free after sales service" (FASS) charges in the assessable value of vehicles sold by the appellant to their dealers. This resulted in a demand of over Rs. 9.6 crores on the appellant for a specific period, along with a penalty of Rs. 2 crores. The appellant sought waiver and stay regarding these adjudged dues.

Appellant's Argument:
The appellant's counsel argued that PDI and FASS charges should not be included in the "transaction value" of vehicles if such charges were not collected from the buyer. Citing a judgment by the Hon'ble Bombay High Court in the case of M/s. Tata Motors Ltd. v. Union of India, it was contended that the charges cannot form part of the transaction value as defined under Section 4(3)(d) of the Central Excise Act. The High Court had struck down circulars relied upon by the adjudicating authority, supporting the appellant's claim for waiver and stay.

Respondent's Argument:
On the other hand, the learned ADC (AR) referred to a Larger Bench decision in the case of Maruti Suzuki v. Commissioner, where PDI and FASS charges were held to be includible in the assessable value of vehicles. The respondent pointed out that the Hon'ble High Court did not interfere with the Tribunal's Larger Bench decision in the Tata Motors case and only struck down the circulars. The respondent argued that the valuation issue fell within the jurisdiction of the Hon'ble Supreme Court and was not entertained by the High Court.

Judgment and Analysis:
Upon careful consideration, the Tribunal noted that the Hon'ble High Court held that PDI and FASS charges can be included in the transaction value only when they are charged by the assessee to the buyer, as per Section 4(3)(d) of the Central Excise Act. The Tribunal found that the Larger Bench decision in Maruti Suzuki case, which allowed inclusion of these charges irrespective of collection from buyers, was impliedly overruled by the High Court's ruling. Consequently, the Tribunal decided to follow the High Court's clear ruling and granted waiver of pre-deposit and stay of recovery for the adjudged dues. The appeal was directed to be listed with other similar appeals for further proceedings.

Conclusion:
In conclusion, the Tribunal's decision favored the appellant by granting waiver and stay based on the interpretation of the law provided by the Hon'ble High Court, which differed from the earlier Tribunal decision. The judgment highlighted the importance of legal interpretations in valuation disputes and the significance of following higher court rulings in such matters.