TMI Blog2013 (2) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... ces in regard to a car which is sold to a customer. 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. Thus 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. Thus 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 transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew term has been introduced by name "transaction value" and the said term transaction value 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners on account of PDI and free after sales services / 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 the 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 servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly referred to the Rule 6 of the said Rules and have wrongly 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 (J177) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the amount incurred towards PDI and said services can fall within the definition of the transaction value. 46. We have noted that after the amendment to Section 4 of the said Act in the year 2000, pursuant to Section 94 of the Finance Act, 2000, the respondents issued Circular No. F B10/ 1/2000/TRU dated 12th May, 2000 as also Circular letter F. No.354/81/2000/TRU a dated 30th June, 2000. A reading, of these two Circulars would clearly go to show that the respondents wanted to clarify the term transaction value and these two Circulars were to be used as guidelines while arriving at the assessable value. Considering these Circulars, we are inclined to accept the submission advanced by learned Senior Counsel Mr. Sridharan that the expenses incurred towards PDI and said services cannot be included in the assessable value. It is peculiar to note that after issuing Circular dated 1st July, 2002, the respondents issued Circular dated 12th December, 2002 and in the said Circular, the respondents clearly admitted that the expenses incurred towards pre delivery inspection and free after sales services provided by the dealer to a vehicle during the warranty period will not be include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, inter alia, purport to hold that where the assessee sells the motor vehicles to a dealer (buyer) at a given price and the dealer in turn sells the said motor vehicles to a customer at a price with dealers margin which includes the PDI charges and after sales service 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 and, hence, liable to be quashed and set aside. Whether the adjudicating authority in the present case is justified in including the PDI and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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