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2012 (9) TMI 244 - HC - Central ExciseInclusion of cost of pre delivery inspection( PDI) and free after sales services to assessable value of the vehicles sold - assessee contested against department's reliance on clause no.7 of the Circular bearing No. 643/34/2002CX dated 1st July, 2002 read with Circular No. 681/72/2002CX dated 12th December, 2012 as it is violative of the provisions of the Central Excise Act, 1944 - Held that:- As and when the car is removed out of the factory of the petitioners, Excise duty was payable. The assessable value was to be determined as per the provisions of Section 4(1)(a) of said Act as amended as the petitioners and the dealers were not related to each other and the price was the sole consideration. In such a case, the value to be taken up for the purposes of Excise duty was the transaction value. As admitted by the petitioners that after a car is sold to a dealer on the terms and conditions entered into mentioned in the dealer’s agreement, a dealer is required to carry out Pre Delivery Inspection as well as said services in regard to a car which is sold to a customer. From the record it is seen that a dealer is required to pay an amount to the petitioners towards the cost of the car and a dealer cannot charge more than the amount specified by the petitioners. The difference between the price so fixed by the petitioners and the price paid by the dealer constitutes what is called as dealer’s margin. A dealer has to spend money to conduct PDI as well as render said services. We are inclined to accept the stand of the petitioners that the dealer is required to perform PDI as well as said services as a part of the dealer’s responsibility cast on him as per the dealership agreement. On consideration of the Clause 7 of Circular dated 1st July, 2000, it is apparent that the respondents have brought into existence a deeming provision that is to say the respondents have treated all the manufacturers of cars on one platform and by fiction taken a decision to add the expenses incurred towards PDI and said services in the assessable value. It will have to be mentioned that in all cases where the expenses incurred towards PDI and said services are solely borne by the dealer and the manufacturer like petitioners have nothing to do with the said expenses then adding those expenses in the assessable value would be contrary to the provisions of Section 4(1)(a) r/w Section 4(3)(d) of the said Act. Looking to the facts and circumstances of this case, the respondents have not been able to place on record any material to show that the amount incurred towards PDI and said services can fall within the definition of the transaction value - thus 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 - in favour of assessee.
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