2004 (4) TMI 159 - AT - Central Excise

Valuation (Central Excise) - Whether the cost of Post-Delivery Inspection (PDI) and after-sales service should form part of the assessable value of automobiles while discharging Central Excise duty - HELD THAT - The reading of the Rule 6 makes it clear that money value of any additional consideration flowing directly or indirectly from the buyer to the assessee is required to be added. In other words the criterion is the same under Rule 6 also i.e. amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee should be added to the transaction value to find out the aggregate value of the goods. Again additional consideration should be flowing directly or indirectly from the buyer to the assessee . Thus the definition and Rule 6 will have no application to considerations not flowing to the assessee. In the present case admittedly nothing flows to the assessee MUL from the consideration towards PDI and after sale service. For that reason cost of these charges cannot form part of the assessable value of the automobiles in question. While on this issue it would be appropriate to recall that valuation provisions u/s 4 constitute the machinery provision for levy and collection of duty and a machinery provision cannot be interpreted to grossly exceed the scope of the levy. Thus impugned order is not sustainable. So too the clarifications relied upon. The impugned order is set aside and the appeal is allowed.

Summary

Issues Involved:
The issue involves whether the cost of Post-Delivery Inspection (PDI) and after-sales service should form part of the assessable value of automobiles while discharging Central Excise duty.

Summary of Judgment:

Issue 1: Assessable Value of Automobiles
The dispute centered on whether charges for PDI and after-sales service should be included in the assessable value of automobiles for Central Excise duty. The department contended that these charges, collected by dealers on behalf of the manufacturer, should be part of the transaction value. The appellant argued that these charges were not payable to the manufacturer and thus should not be included. The Tribunal examined the definition of "transaction value" and relevant circulars. It was concluded that the charges for PDI and service should not form part of the assessable value as they did not flow directly or indirectly to the manufacturer.

Issue 2: Interpretation of Valuation Rules
The Tribunal analyzed Rule 6 of the Valuation Rules, which requires the addition of any additional consideration flowing from the buyer to the assessee. It was emphasized that the charges in question did not flow to the manufacturer, and therefore, could not be considered as part of the assessable value. The Tribunal highlighted that valuation provisions under Section 4 should not be interpreted to exceed the scope of the levy. Consequently, the impugned order was set aside, and the appeal was allowed.

This judgment clarifies the interpretation of the assessable value for Central Excise duty concerning charges related to PDI and after-sales service, emphasizing that such charges must flow directly or indirectly to the manufacturer to be included in the transaction value.