1993 (7) TMI 188 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of reimbursed amounts to wholesale dealers in the assessable value under Rule 5 of the Central Excise (Valuation) Rules, 1975.
2. Determination of whether wholesale dealers are 'related persons.'
3. Classification of reimbursed amounts as additional consideration or trade discount.

Detailed Analysis:

Issue 1: Inclusion of Reimbursed Amounts in Assessable Value
The primary issue in both appeals is whether the amount reimbursed to wholesale dealers for free after-sales services and pre-delivery inspection should be included in the assessable value under Rule 5 of the Central Excise (Valuation) Rules, 1975. The appellants argued that these amounts should not be included as they are not additional consideration flowing from the dealers to the appellants. They cited several case laws, including Moped India v. A.C. C.E. and Standard Electric Appliances v. Superintendent of Central Excise, to support their contention. However, the Department contended that these charges should be included in the assessable value, citing cases like Seshasayee Paper & Board Ltd. v. Collector of Central Excise and Coromondal Fertilizers Ltd. v. Union of India.

Issue 2: Determination of 'Related Persons'
The Assistant Collector was directed by the Hon'ble Madras High Court to determine whether the wholesale dealers and the appellants were 'related persons.' The Assistant Collector adjudicated that the wholesale dealers were not related persons. This decision was upheld by the Collector (Appeals), and the appellants did not contest this finding further.

Issue 3: Classification of Reimbursed Amounts
The appellants argued that the reimbursed amounts for pre-delivery inspection and after-sales services were expenses borne by the buyers and should not be considered additional consideration. The Department, however, argued that these amounts were collected at the time of sale and should be included in the assessable value. The Tribunal examined the pricing mechanism and found that the appellants were clearing motor cycles at a particular price from the factory and subsequently adding amounts termed as dealer's margin and mark-up price in invoices to wholesale dealers, DGS&D, CSD, and Government Departments. These additions included the reimbursed amounts for after-sales services and pre-delivery inspection.

The Tribunal held that these charges were not expenses incurred in the duty-paid godown but were collected at the time of sale. Therefore, they constituted additional consideration. The Tribunal further distinguished between transactions with wholesale dealers and direct sales to DGS&D, CSD, and Government Departments. For sales to wholesale dealers, the transactions were from principal to principal, and the reimbursed amounts could be considered as discounts. However, for direct sales to DGS&D, CSD, and Government Departments, the reimbursed amounts could not be considered discounts and were additional consideration.

Conclusion:
The Tribunal concluded that the reimbursed amounts to wholesale dealers for pre-delivery inspection and after-sales services should be included in the assessable value for direct sales to DGS&D, CSD, and Government Departments but not for sales to wholesale dealers. The Tribunal ordered that the amount should be added to the declared cum-duty price, and duty should be calculated by working backwards, in line with the judgment in VST Industries v. Collector of Central Excise. The appeals were rejected except to the extent stated, and any consequential relief was to be provided in accordance with the law.