2014 (10) TMI 764 - AT - Central Excise

Valuation of goods - dealers of Maruti Suzuki are charging price over and above the ex-showroom price from the ultimate customers of the vehicles - whether part of the promotional discount paid from the dealer s margin is includible in the assessable value for the purpose of payment of central excise duty or not - Held that - it appears that the dealers have not borne their share of discount on their own accord but because of the fact that they are bound by the meticulously designed Dealership Agreement which they are bound to accept in their business interest. It would be commercially unthinkable for any dealer to remain in business without offering promotional discounts on Ex-showroom Price , while charging over and above that price in the name of Handling Charges or by some other name. Therefore, prima facie it transpires that the discounts have been offered in connection with the sale and such discounts were a booster to the appellant to increase the sales. Further, such discounts has character of expenses on account of Advertising or Publicity, Marketing and Selling Organization Expenses, which are covered within the definition of transaction value as provided under Section 4(3)(d) of CEA, 1944. Invocation of extended period of limitation - The handling charges certainly seems to have been informally fixed by the appellants as the appellant during the course of investigation admitted that the dealers do not have any association by the name of Maruti Dealers Association which means that the dealers did not have a common platform, where they could have fixed the handling charges with consensus. The appellants suppressed this fact from the department that the dealers are charging price over and above the ex-showroom price from the ultimate customers of the vehicles. Thus, Prima facie, the provisions for extended period of limitation have rightly been invoked when discount is compensated through handling charges collected by the dealers indirectly benefiting the appellant to under value the excisable goods while delivering to their dealers. prima facie view that the adjudication has force and pre-deposit is required to be directed in this case to protect interest of Revenue - stay granted partly.

Issues Involved:
1. Inclusion of dealer's contribution in promotional schemes in the assessable value.
2. Applicability of extended period for demand under Section 11A(1) of the Central Excise Act, 1944.
3. Interpretation of "transaction value" under Section 4(3)(d) of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Inclusion of Dealer's Contribution in Promotional Schemes in the Assessable Value:
The appellant, engaged in manufacturing and selling motor vehicles, provided various promotional schemes through its dealers. The central issue was whether the dealer's contribution to these schemes should be included in the assessable value for excise duty purposes. The adjudicating authority held that the discounts borne by the dealers were a flow of consideration to the appellants by reason of, or in connection with, the sale of vehicles, thereby includible in the assessable value under Section 4 of the Central Excise Act, 1944.

The appellant argued that discounts should be deductible from the assessable value, citing the Supreme Court's decisions in Union of India vs. Bombay Tyres International Ltd. and Philips India Ltd. They contended that since no extra consideration flowed from the dealers to them, and the discounts were passed on to customers, these should not be included in the assessable value.

However, the tribunal noted that the transaction value includes any amount a buyer is liable to pay by reason of or in connection with the sale, including amounts paid on behalf of the assessee to the dealer. The tribunal found that the promotional discounts were given under an understanding between the manufacturer and the dealer, forming part of the assessable value. The tribunal also referenced the Maruti Suzuki India Ltd. case, where similar dealer contributions were included in the assessable value.

2. Applicability of Extended Period for Demand under Section 11A(1) of the Central Excise Act, 1944:
The appellant raised an issue on the limitation, arguing that the department was aware of the promotional schemes. The tribunal, however, found that the dealers were charging handling charges over and above the ex-showroom price, which was not disclosed to the department. This non-disclosure justified the invocation of the extended period for demand under Section 11A(1) of the Act.

3. Interpretation of "Transaction Value" under Section 4(3)(d) of the Central Excise Act, 1944:
The tribunal examined the definition of "transaction value" under Section 4(3)(d), which includes the price paid for the goods and any amount the buyer is liable to pay to or on behalf of the assessee by reason of or in connection with the sale. The tribunal concluded that the transaction value is not confined to the amount paid directly but includes any indirect benefit received by the assessee in connection with the sale, such as promotional discounts borne by dealers.

The tribunal held that the discounts offered by dealers were in connection with the sale and were a booster to the appellant's sales. Therefore, they were includible in the assessable value. The tribunal also referenced the Supreme Court's rulings that any legally enforceable right against the customer in relation to the sale must be included in the assessable value.

Conclusion:
The tribunal directed the appellant to deposit Rs. 150 crores within eight weeks and stayed the realization of the balance amount of duty, interest, and penalties until the disposal of the appeal. The tribunal's decision emphasized the broad interpretation of "transaction value" and the inclusion of dealer contributions in promotional schemes in the assessable value for excise duty purposes.

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