1991 (8) TMI 190 - AT - Central Excise

Issues Involved:

1. Deduction of dealers' margin (trade discount) of Rs. 5100/- per vehicle.
2. Non-inclusion of "Material Service Performance Security Deposit" (MSPSD) of Rs. 2000/- per vehicle in the assessable value.

Issue-wise Detailed Analysis:

1. Deduction of Dealers' Margin (Trade Discount) of Rs. 5100/- Per Vehicle:

The appellant claimed a deduction of Rs. 5100/- per vehicle as a dealers' margin. The basis for this deduction was that if wholesale dealers were appointed on a principle-to-principle basis, they would have been given this margin. The remuneration to the authorized representatives would be equal to the margin payable to wholesale dealers, thus qualifying as a deduction under Rule 6(a) of the Valuation Rules. The appellant argued that the retail price minus the wholesale price should determine the assessable value, and the deduction of Rs. 5100/- was necessary to arrive at the wholesale price.

The Assistant Collector disallowed the claim, but the Collector, on appeal, remanded the matter for a de novo consideration of the dealers' margin. The Collector acknowledged that some deductions for dealers' margin should be allowed but emphasized that expenses like "publicity," "after-sale service," and "pre-delivery inspection" should be included in the value and not deducted.

The Tribunal, referencing Rule 6(a) of the Valuation Rules and previous judgments, concluded that the deduction of Rs. 5100/- was reasonable and in accordance with trade practice. The Tribunal noted that the retail price of the vehicles was Rs. 1,67,000/-, and the claimed deduction of Rs. 5100/- amounted to approximately 2.9%, which was consistent with the trade practice of other manufacturers like Swaraj Mazda and Allwyn Nissan. The Tribunal found the Collector's observations on excluding certain expenses irrelevant, as the goods were sold at retail and the assessable value should be determined strictly under Rule 6(a). Thus, the appellants were entitled to the deduction of Rs. 5100/- as dealers' margin.

2. Non-inclusion of "Material Service Performance Security Deposit" (MSPSD) of Rs. 2000/- Per Vehicle:

The appellant also claimed that the MSPSD of Rs. 2000/- per vehicle, collected from customers opting for the MSPSD scheme, should not be included in the assessable value. This deposit was intended to ensure that authorized representatives performed the servicing of vehicles and was reimbursed to them upon completion of services. The servicing materials were supplied by the authorized representatives directly to the customers, and the deposit was an advance payment for these materials.

The Assistant Collector disallowed the claim, and the Collector upheld this decision. However, the Tribunal found that the MSPSD was optional and represented the cost of materials used in servicing the vehicle, which were not manufactured by the appellants. The Tribunal noted that the amount did not enter the manufacturer's pocket and had no nexus with the manufacture of the goods. Therefore, the MSPSD should not be included in the assessable value.

Interest on Security Deposit:

The Tribunal also addressed the issue of interest accrued on the security deposit. It concluded that since the interest had no relation to the manufacture of Light Commercial Vehicles, it could not be added to the assessable value. The interest obtained from the security deposit was a result of an ancillary activity and unrelated to the production or manufacture of the vehicles.

Conclusion:

The appeal was allowed, with the Tribunal ruling in favor of the appellant on both issues. The deduction of Rs. 5100/- as dealers' margin was deemed justified, and the MSPSD of Rs. 2000/- was not to be included in the assessable value. The interest accrued on the security deposit was also excluded from the assessable value.

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