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TMI Blog2014 (3) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice charges, then, the assessable value for determining the Central Excise duty payable by the assessee has to be determined by including the PDI and after sales service charges even if they are not been charged by the assessee to the dealer, which in our opinion is contrary to the provisions of Section 4(3)(d) of the Central Excise Act, 1944. In the case of Tata Motors Ltd. [2012 (9) TMI 244 - BOMBAY HIGH COURT], HC had taken note of the decision of the Larger Bench in the case of MARUTI SUZUKI INDIA LTD [2010 (8) TMI 49 - CESTAT, NEW DELHI] and yet came to the conclusion favourable to the appellants in that case. - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (291) E.L.T. A81 (SC). The learned counsel would also take us through the agreements entered into with the dealers to support his submission that the issue is covered by the decision of the Hon'ble High Court of Bombay in their favour. 5. We have considered the submissions made by both the sides. Item No.7 of the table in the Circular clarifying points of doubt is reproduced below and reads as under: Sl. No. Point of doubt Clarification 7. What about the cost of after sales service charges and Pre-Delivery Inspection (PDI) charges, incurred by the dealer during the warranty period? Since these services are provided free by the dealer on behalf of the assessee, the cost towards this is included in the dealers margin (or reimbursed to him).This is one of the considerations for sale of the goods (motor vehicles, consumer items, etc.) to the dealer and will therefore be governed by Rule 6 of the Valuation Rules on the same grounds as indicated in respect of advertisement and publicity charges. That is, in such cases the after sales service charges and PDI charges will be included in the assessable value. After this circular was issued proceedings were initiated against sever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value. According to the petitioners on account of the dealership agreement, the dealer is required to carry out Pre Delivery Inspection (For short PDI) before the car is actually delivered to the customer. After the car is delivered to the customer, the customer is expected to bring the car to the dealer for getting the said car serviced after running the car for certain number of kilometres or certain number of days more particularly stated in the owner's manual. The dealer is required to conduct free servicing in respect of the said car, which would be used by the customer. These services are referred to as free after sales services. (For short said services). 6. According to the petitioners, the dealer has to employ necessary persons as also use necessary machinery to carry out PDI and said services. The expenses to conduct PDI and said services are to be incurred by the dealer without reference to the petitioners. It is also the case of the petitioners that the petitioners do not reimburse the expenses incurred by the dealer on PDI and said services. According to the petitioners they have been paying Excise duty on the amount charged by them to the dealer while selling the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the petitioners have not included any amount in the assessable value with reference to term 'servicing' and as such the expenses incurred towards PDI and said services, which expenses are incurred solely by the dealer without reference to the petitioners cannot be included in the term 'servicing' appearing in the term 'transaction value'. For the reasons mentioned aforesaid if a dealer incurs expenses towards the PDI as well as free after sales services without reference to the manufacturer like petitioners, then, the said expenses incurred by the dealer cannot form a part and parcel of the assessable value. To that extent, Clause 7 of the Circular dated 1st July, 2002 is illegal and void and is contrary to the provisions of Section 4(1)(a) r/w Section 4(3)(d) of the said Act. Similarly, the Circular dated 12th December, 2002 to the extent it confirms Clause 7 of Circular dated 1st July, 2002 is void and illegal. 49. For all the aforesaid reasons, we hold that as per Section 4(3)(d) of the Central Excise Act, 1944 the PDI and free after sales services charges can be included in the transaction value only when they are charged by the assessee to the buyer. The impugned circulars, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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