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TMI Blog2022 (4) TMI 1539X X X X Extracts X X X X X X X X Extracts X X X X ..... have already been marketed to the dealer. Appeal allowed. - EXCISE APPEAL NO. 1437 OF 2012 - FINAL ORDER NO. A/86257/2022 - Dated:- 11-4-2022 - HON BLE MR C J MATHEW, MEMBER (TECHNICAL) AND HON BLE MR AJAY SHARMA, MEMBER (JUDICIAL) For the Appellant : Shri Rajesh Ostwal, Advocate For the Respondent : Ms Anuradha S Parab, Assistant Commissioner (AR) ORDER PER: C J MATHEW In this appeal of M/s General Motors India Private Limited, against order-in-original no: 13/CEX/2011 dated 5th December 2011 of Commissioner of Central Excise, Pune I in which tax liability of ₹ 1,05,51,675/- has been ordered to be recovered under section 11A of Central Excise Act, 1944 along with interest thereon under section 11AB of Central Excise Act, 1944, besides penalties imposed under rule 25 of Central Excise Rules, 2002, the issue for consideration is the correctness of the inclusion of cost of pre-delivery inspection and free after-sale service undertaken by dealers of the appellant for the period from April 2010 to December 2010 in the assessable value. 2. According to Learned Counsel for appellant, no payment has been made to dealers and valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court on 27-1-2000 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 1-7-2000 which led to issuance of another circular dated 1-7-2002 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 the following reading : 7 What about the cost of after sales service charges and pre-delivery instpection (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 dealier s margin (or reimbursed to him). This is one of the considerations for sale of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions specifically disallowed by the Supreme Court in Bombay Tyre International Ltd. reported in 1983 (14) E.L.T. 1896 (S.C.). 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 assessee by the reason of sale or in connection with sale. A close reading of Section 4(3)(d) of the said Act would indicate that the term transaction value comprises of price actually paid or payable by the buyer and includes additional amount that the buyer is liable to pay or on behalf of the assessee by reason of sale or in connection of sale whether payable at the time of sale or at any other time including the amount charged for or to make pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 clear from the record and on the basis of the typical dealership agreement entered into with the dealer by the petitioners that a dealer renders PDI as well as said services on account of dealership. It is pertinent to note that the respondents have in affidavit in reply dated 29th June, 2012 admitted that the dealer carries out free PDI and after sales services at their end. It is admitted that labour cost towards PDI and said services is borne out of reta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. v. Voltas Ltd. reported in 1977 (1) E.L.T. (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 petitioners to the dealer for a particular consideration, no other amount is payable by the dealer to the petitioners. It is required to be mentioned that the petitioners are not reimbursing any amount to the dealer towards expenses incurred for the PDI and said services and the petitioners are paying Excise duty on the entire amount for which the petitioners sale the car to the dealer. In the present case, even if it is taken that the petitioners are giving trade disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 12-5-2000 which was issued contemporaneously with the amendment in Section 4. It expressly states that amount should be recovered from the buyer by the assessee manufacturer and makes the following reading in this behalf : 2.2 Definition of transaction value has also been modified to make it more transparent. Any amount paid by the buyer himself or on his behalf to the assessee by reason of, or in connection with the sale, would form part of the transaction value. Any amount that is charged or recovered from the buyer on account of factors li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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