1998 (2) TMI 271 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of dealers' margin in assessable value for Mahindra.
2. Inclusion of cost of free after-sales services and pre-delivery inspection (PDI) in assessable value for Maruti.
3. Validity of show cause notices and limitation period.

Summary:

1. Inclusion of Dealers' Margin in Assessable Value for Mahindra:
Mahindra, engaged in the manufacture of Jeep vehicles, had a network of dealers who provided after-sales service and advertisement. The dispute involved whether a part of the dealers' margin should be included in the assessable value u/s 4(1)(a) of the Central Excise Act, 1944. The Collector held that the cost of services rendered by dealers should be included in the assessable value. However, the Tribunal, referencing the Supreme Court decision in Philips India Ltd. 1997 (91) E.L.T. 540 (S.C.), held that no part of the dealers' margin covering the cost of free after-sales services is liable to be added to the assessable value.

2. Inclusion of Cost of Free After-Sales Services and PDI in Assessable Value for Maruti:
Maruti's dispute involved whether the cost of free after-sales services and PDI conducted by dealers should be included in the assessable value. The Tribunal held that the part of dealers' margin covering these costs cannot be included in the assessable value, referencing the decision in Philips India Ltd. and following the principle that such costs benefit both the manufacturer and the dealer.

3. Validity of Show Cause Notices and Limitation Period:
- Mahindra: The show cause notice dated 3-1-1986 was deemed illegal as it was issued by the Superintendent post-amendment requiring issuance by the Collector. Other notices were validated by addendum notices specifying the differential duty.
- Maruti: The show cause notice was challenged on the ground of limitation. However, the Tribunal held that the allegations in the notice, which were not denied, justified invoking the extended period of limitation u/s 11A of the Act.

Conclusion:
The Tribunal set aside the orders against Mahindra and Maruti, holding that the cost of free after-sales services and PDI cannot be included in the assessable value. The case was remanded for fresh adjudication on the aspect of advertisement costs, and the appeals were allowed.