2000 (5) TMI 359 - AT - Central Excise

Summary

Issues Involved:
1. Valuation of motor vehicles for Central Excise duty.
2. Inclusion of after-sales service costs in the assessable value.
3. Relationship between the manufacturer and dealers.

Summary:

Valuation of Motor Vehicles for Central Excise Duty:
The appellants, manufacturers of motor vehicles, challenged the decision of the Commissioner of Central Excise and Customs (Appeals), Pune, which confirmed the Order-in-Original by the Assistant Commissioner. The Assistant Commissioner held that the assessable value declared by the assessee did not reflect the true sale consideration u/s 4(1)(a) of the Central Excise Act and determined the normal price u/r 5 of the Valuation Rules u/s 4(1)(b) of the Act.

Inclusion of After-Sales Service Costs in the Assessable Value:
The department raised queries regarding expenses incurred by dealers for after-sales service and advertising. The appellants clarified that the cost of services was shared between them and the dealers, with labour costs borne by the dealers from their retailing profit. A show cause notice was issued proposing to revise the value by adding labour charges reimbursed to the servicing dealer by the manufacturer. The Assistant Commissioner confirmed the demand and imposed penalties, which was upheld by the Commissioner (Appeals).

Relationship Between the Manufacturer and Dealers:
The appellants argued that their relationship with dealers was at arm's length and on a principal-to-principal basis. The dealership agreement included provisions for service centres, maintenance of records, and advertising. The department contended that the relationship was not at arm's length and that the dealer acted as an agent of the assessee, leading to a financial flow-back.

Judgment:
The Tribunal considered the rival submissions and referred to various clauses of the dealership agreement and previous judgments, including Bajaj Auto Ltd. v. CCE and Mahindra & Mahindra Ltd. v. CCE. It was noted that the goods were sold to dealers on a principal-to-principal basis, and any after-sales services provided by dealers did not affect the assessable value of the vehicles. The Tribunal concluded that the department's case was not supported by law and facts, and the appeal was allowed, setting aside the impugned orders with consequential relief according to law.