1987 (10) TMI 193 - AT - Customs

Summary

Issues Involved:
1. Whether the dealers' margin of Rs. 550/- per motorcycle should be deducted from the sale price to determine the assessable value.
2. Whether freight and insurance costs should be deducted from the sale price to determine the assessable value.
3. Whether the sales to individual customers constituted wholesale or retail sales.
4. The applicability of Rule 6(a) of the Central Excise (Valuation) Rules, 1975.

Detailed Analysis:

1. Dealers' Margin Deduction:
- Respondents' Argument: The respondents argued that since the sales were retail sales to individual consumers, Rule 6(a) of the Central Excise (Valuation) Rules, 1975 applied. According to this rule, the dealers' margin of Rs. 550/- per motorcycle, which was actually given to the dealers, should be deducted from the retail price to arrive at the deemed wholesale price.
- Department's Argument: The department contended that the dealers were agents of the respondents and the margin described as "distribution expenses" or "dealers' margin" was essentially agent's commission. As per the Supreme Court judgment in Coromandal Fertilizers Limited, deduction of agent's commission was not permissible.
- Tribunal's Decision: The Tribunal concluded that the sales were retail sales and not wholesale. Therefore, Rule 6(a) applied, and the deduction of Rs. 550/- per motorcycle was reasonable and should be allowed from the retail price to arrive at the notional wholesale price.

2. Freight and Insurance Deduction:
- Respondents' Argument: The respondents cited the Supreme Court judgment in Bombay Tyre International, arguing that the cost of transportation (freight and insurance) should be deducted from the sale price to arrive at the assessable value.
- Department's Argument: The department agreed that freight and insurance could be deducted but insisted on verification of the amount by the Assistant Collector.
- Tribunal's Decision: The Tribunal ordered that the deduction towards freight and transit insurance should be allowed after verification of the amount by the Assistant Collector.

3. Wholesale vs. Retail Sales:
- Key Consideration: The primary question was whether the sales of one motorcycle each to individual customers constituted wholesale or retail sales. The Tribunal examined definitions and understandings from various jurisdictions, including the UK, Australia, New Zealand, and Indian High Courts.
- Conclusion: The Tribunal concluded that sales of one motorcycle each to individual consumers for personal use were retail sales. The fact that the respondents sold demonstration pieces to a few dealers did not change the general proposition that the sales to the public were retail sales.

4. Applicability of Rule 6(a):
- Respondents' Argument: The respondents argued that Rule 6(a) of the Central Excise (Valuation) Rules, 1975 applied since the sales were retail sales.
- Tribunal's Decision: The Tribunal agreed with the respondents, stating that the assessable value should be determined in terms of Rule 6(a). The deduction of Rs. 550/- per motorcycle was deemed reasonable to arrive at the notional wholesale price.

Final Order:
- The Tribunal ordered that the deduction towards freight and transit insurance should be allowed after verification by the Assistant Collector.
- The deduction of Rs. 550/- from the retail price to arrive at the assessable value in terms of Rule 6(a) of the Central Excise (Valuation) Rules, 1975 was also allowed.
- The appeal was disposed of in these terms.