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TMI Blog2015 (12) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... ler thereafter does ASS to the customer and incurs expenditure therefore, it cannot be added back to the sale price charged by the manufacturer from the dealer for computing the assessable value. This is more so, where the ASS is done by the dealer many weeks after the goods have been sold to him by the manufacturer. Such a post-sale activity undertaken by the dealer is not relevant for the purpose of excise since the goods have already been marketed to the dealer. PDI charges and free ASS charges would not be included in the assessable value under Section 4 of the Act for the purposes of paying excise duty. The view taken by the Tribunal in favour of assessees in this behalf is correct in law and all the appeals of the Department, are dismissed. On the other hand, Larger Bench view in Maruti Suzuki [2010 (8) TMI 49 - CESTAT, NEW DELHI] does not lay down the law correctly and is, therefore, overruled - Decided in favour of Assessee. - CIVIL APPEAL NOS. 5155-5156 OF 2007, CIVIL APPEAL NOS. 1763-1764 OF 2009, CIVIL APPEAL NO. 7007 OF 2011, CIVIL APPEAL NO. 7550 OF 2011, CIVIL APPEAL NO. 2204 OF 2013, CIVIL APPEAL NO. 2205 OF 2013, CIVIL APPEAL NOS. 957-959 OF 2014, CIVIL APPEAL N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of settled legal positions and finalise the provisional assessments accordingly. Aggrieved by the above Order-in-Appeal, the Department filed an appeal before the CESTAT, Bangalore. The Tribunal, vide final Order Nos. 1860 1861/2006 dated 03.11.2006 has rejected Department's appeal and upheld the Commissioner (Appeals), Order-in-Appeal, holding that the abatement in respect of PDI charges and ASS charges is correct, by relying upon the Tribunal's decision in the case of Maruti Udyog Limited and remanded the case to the original Authority for re-computation. We may note that the Tribunal's decision in the case of Maruti Udyog Limited was questioned by the Department before this Court vide C.A. No. D 7670 of 2006, which was rejected on the ground of delay. It is under the aforesaid circumstances the Tribunal's order is challenged by way of instant appeals filed by the Department. 3. We may point out, at this stage, that some other Bench(es) of the Tribunal had taken contrary view and the matter was referred to the Larger Bench which decided the issue in the case of Maruti Suzuki India Ltd. v. CCE, New Delhi 2010 (257) ELT 226. It has held that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof. It organised the sales of these articles from its head office at Bombay as also from its branch office at Calcutta, Delhi, Madras, Bangalore, Cochin and Lucknow. From these offices it effected direct sales to consumers at list prices and the sales so effected came to about 90 to 95% of its production. Apart from these sales, it also sold the articles to wholesale dealers from different parts of the country in pursuance of agreements entered into with them. The agreements provided that the dealers should sell the articles at the list prices, the respondent would sell them the articles at 22% discount over the list prices, the dealers would not be entitled to any discount on the prices of accessories, and the dealers should give service to the units sold in their territory. The respondent's case was that the list price, after deducting the discount of 22% allowed to the wholesale dealers, would constitute the wholesale cash price for determining ad valorem value. This case was accepted by the excise authorities up to the end of 1962. However, thereafter Department changed its stand by taking the position that excise duty would be assessed and levied not on the footing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dealers under which certain obligations were undertaken by them like service to the articles, would not render the price any the less the wholesale cash price . To put it in other words, even if the articles in question were sold only to wholesale dealers on the basis of agreements and not to independent persons, that would not make the price for the sales anything other than the wholesale cash price . The argument that what was relevant to determine the wholesale cash price under clause (a) of Section 30 of the Sea Customs Act, 1878, was the price of goods of a like kind and quality was negatived by the Privy Council by saying that goods under assessment may, under clause (a) be considered as members of their own class even though at the time and place of importation there are no other members and that the price obtained for them may correctly represent the price obtainable for goods of a like kind and quality at the time and place of importation. 6. Another decision which may be relevant for our purposes is the case of M/s. Philips India Ltd. v. CCE, Pune 1997 (91) ELT 540 wherein advertisement expenses and free ASS during guarantee period was provided by dealers to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef order, this Court affirm the view of the Tribunal holding that when sale to independent dealers is at an arm's length, payment directly made by the assessee for labour ASS to additional service centres arranged by the assessee and subsequent recovery of such expenses by the assessee from the dealer, is not a case of flow back of additional consideration nor does such an arrangement make such dealer an agent of the assessee. 8. What follows from the above is that where manufacturer himself does the ASS and incurs any expenditure thereon, the same is not deductible from the price charged by him from his buyer. Likewise, where the manufacturer has sold his goods to his dealer and wholesale dealer thereafter does ASS to the customer and incurs expenditure therefore, it cannot be added back to the sale price charged by the manufacturer from the dealer for computing the assessable value. This is more so, where the ASS is done by the dealer many weeks after the goods have been sold to him by the manufacturer. Such a post-sale activity undertaken by the dealer is not relevant for the purpose of excise since the goods have already been marketed to the dealer. 9. The aforesaid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e buyer is also to pay an additional amount to the manufacturer, apart from the price of the goods. This is also supported by use of expression 'by reason or' or 'in connection with the sale' of the goods. The expression 'in connection with the sale of the goods' would only mean that but for the payment of the additional amount, the sale of the goods would not take place. When we keep in mind the aforesaid legal position, we find no error in the view taken by the Tribunal giving benefit to the assessee. Both the sides were in unison in accepting the position that no major change had been incorporated w.e.f. 01.07.2000 with emphasis on the 'different transaction value' from the 'assessable value', the essence of valuation principles had not undergone major change and the decisions delivered by this Court with regard to unamended provision on the principle of valuation were still applicable in determining the transaction value under the new provisions of Section 4 of the Act red with Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000. In fact, the Order-in-Original in M/s. TVS Motors Company Ltd. or in other cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 (120) ELT 290 (S.C.). Thus, while withdrawing the Circular No. 355/71/97-CX., dated 19.11.1997 and subsequent Circular No.435/1/99-CX., dated 12.01.1999, PDI and free ASS provided by the dealer of the vehicle, during the warranty period will not be included in the assessable value. Mr. Radhakrishnan, however, tried to overcome the aforesaid circular by submitting that the appeals in the aforesaid cases were dismissed by this Court on 27.01.2000 with one line order without giving any reasons. He emphasized and insisted that the issue involved in the present case is more proximate with the factual position that prevailed in Bombay Tyre International and, therefore, the same should be followed. 14. We would like to point out here that the aforesaid circular was in respect of the statutory provision that prevailed prior to 2000. There was statutory amendment carried out in the year 2000 and new valuation procedures were made effective from 01.07.2000 which led to issuance of another circular dated 01.07.2002 by the Board. Various clarifications were issued in the circular. We are concerned with point of doubt No.7 contained in that circular and the explanation thereto which makes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue has been specifically defined in Section 4(3)(d) of the said Act. The present Section 4(1)(a) r/w definition of term transaction value gives more clarity and all doubts as to how the assessable value is to be arrived at are removed. It is also noted that the various items incorporated in the term transaction value as defined in Section 4(3)(d) of said Act as forming part of value of Excisable goods are in fact the expenses/deductions specifically disallowed by the Supreme Court in Bombay Tyre International Ltd. reported in 1983 (14) ELT 1896 SC. If one closely observes the definition of the term transaction value, it uses the terminology 'servicing'. It appears that the respondents are taking the benefit of this term 'servicing' for the purpose of adding to the assessable value, the expenses incurred by the dealer towards PDI and free said services by resorting to Clause 7 of Circular dated 1st July, 2002 and Circular dated 12th December, 2002. 43. Turning to point in question, it is noticed that the definition of the transaction value in Section 4(3)(d) of the said Act is extensive and ropes in the price of the goods and other amounts charged by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces/after sales services. It is clear that when the petitioners are selling the car to a dealer, price is the sole consideration and the petitioners and the dealer are not related to each other. Having complied with these requirements set out in Section 4(1) (a) of the said Act, the assessable value of the Cars will have to be treated as the one which will be the transaction value. The transaction value will have to be arrived at by taking into consideration the definition of the term transaction value appearing in Section 4(3)(d) of the said Act. The record clearly goes to show that apart from the price which is paid by the dealer to the petitioners, no amount is recovered by the petitioners from the dealer or the customer. As such, the stand of the respondents that the expenses incurred towards PDI as well as said services have to be included in the assessable value cannot be accepted. This is being observed on the ground that there is no material to show that the expenses for the pre-delivery inspection as well as after sales services are paid by the dealer to the petitioners. The dealer renders PDI and said services as a routine and legitimate activity as a dealer. It is also c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly linked the expenses incurred for PDI and said services with expenses for advertisement or publicity. It is required to be noted that the provisions of the said Rules will not be applicable to the facts of this case as the transaction between the petitioners and the dealer does not fall within the ambit of Section 4(1)(b) of the said Act. The transaction of sale of a car between the petitioners and the dealer is governed by the provisions of Section 4(1)(a) of said Act as the petitioners as assessee and the dealer as a buyer of the car are not related to each other and price is the sole consideration for the sale. In our view, reference to the Rule 6 of the Valuation Rules in Clause 7 of Circular dated 1st July, 2002 is totally misconceived. The reference made by learned Senior Counsel Mr. Sridharan to the case of Mr. A.K. Roy and Anr. Vs. Voltas Ltd. reported in 1977 (1) ELT (J-177) SC is apt. We have perused the said judgment and applying the said judgment to the facts of the present case, the respondents would be able to demand Excise duty on the amount which is charged by the petitioners to the dealer. It is to be noted that as per the record, once the car is sold by the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can fall within the definition of the transaction value. We agree with the enunciation of legal position stated by the High Court. 16. We have also to keep in mind these cases pertain to the period post 2000. It is also to be borne in mind that the clarification very categorically proceeded on the basis that the services were provided free by the dealer 'on behalf of the assessee' and the same was 'during the warranty period'. The clarification given, keeping in mind the aforesaid two features, makes all the difference inasmuch in these cases, we find that the services which are provided by the dealers are on their behalf and not on behalf of the assessees. The facts disclosed that the amount which was reimbursed by the assessee to their dealers pertaining to free service was being claimed as abatement in relation to the normal transaction value. It was one of the contention of these assessees that free service charges is a post sale activities and all post sale activities continued to be excludable in determining transaction value. 17. On the other hand, we would like to refer to Circular dated 12.05.2000 which was issued contemporaneously with the ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge in connection with production and sale of the goods recovered from the buyer 7. It would be seen from the definition of 'transaction value' that any amount which is paid or payable by the buyer to or on behalf of the assessee, on account of the factum of sale of goods, then such amount cannot be claimed to be not part of the transaction value. In other words, if, for example, an assessee recovers advertising charges or publicity charges from his buyers, either at the time of sale of goods or even subsequently, the assessee cannot claim that such charges are not includable in the transaction value. The law recognizes such payment to be part of the transaction value that is assessable value for those particular transactions. 19. The sequitur of the aforesaid discussion would be to hold that PDI charges and free ASS charges would not be included in the assessable value under Section 4 of the Act for the purposes of paying excise duty. The view taken by the Tribunal in favour of assessees in this behalf is correct in law and all the appeals of the Department, i.e. C.A. Nos. 5155-5156/2007, 1763-1764/2009, 2204/2013, 2205/2013, 957-959/2014, 7854-7865/2014 and 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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