TMI Blog2008 (4) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... rate, as per the provisions of Section 11AB of the Act, and besides this, penalty of equal amount was imposed on the appellant under Section 11 AC of the Act read with Rule 173Q (1) of Central Excise Rules 1944 Rule 25 (1) of Central Excise Rules 2001/2002. The duty demand has been confirmed against the appellant in respect of clearances of motor cycles by them to their dealers during the period from 01/07/02 to 31/12/03 on the ground that while during this period, as per the appellant's agreement with their dealers, the dealers were providing free after sale service to the customers for which the dealers were being reimbursed by the appellant @ Rs. 70/- per service, this amount was not being added to the assessable value, resulting in short payment of duty. According to department, the assessee failed to substantiate their claim regarding inclusion of after sale service charges in the assessable value and since they deliberately suppressed the information regarding the after sale service charges paid to the dealers, longer limitation period 5 years under proviso Section 11A(1) of the Act has been invoked for recovery of allegedly short paid duty and for the same reason, penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacturer, and for which the dealers were being reimbursed by the manufacturer, is not includable in the assessable value. This judgment of Hon'ble Supreme Court has been followed by the Hon'ble Supreme Court in the case of Mahindra Mahindra Ltd. Vs. CC, reported in 1999 (111) E.L.T. A 126 (S.C.). In the case of Mahindra Mahindra Ltd., also, the Hon'ble Supreme Court held that when part of the dealer's margin covers the cost of free after sale service being provided by the dealers on behalf of the manufacturers, the cost of such after sale service is not includible in the assessable value so long as the transactions between the manufacturer and the dealers are on principal to principal basis. These judgments are applicable to this can also, even though this case pertain to period w.e.f. 01/7/2000. (v) Judgment of the CESTAT in the case of Maruti Udyog Limited vs. CCE, Delhi-III reported in 2004 (170) E.L.T. 245 (Tri.) was also cited whereas in respect of a similar dispute for the period w.e.f. 01/7/2000, it was held that pre-delivery inspection and after sales service charges, received by the dealers, not being payable to manufacturer or payable on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason of or in connection with the sale of goods and the same certainly increase the marketability of the product. Therefore, the value of the after sale service must form part of the assessable value of the goods. (iii) Though the dealers are reimbursed by the appellants for the free after sale service being provided by the dealers to the customers and it has been claimed by the appellant that the amount being reimbursed by them to the dealers for free after sale service is already included in the assessable value, the appellant have failed to adduce any evidence that such expenses are already included in the assessable value. (iv) Extended limitation period has been correctly invoked as the appellant failed to divulge the requisite details which were their personal knowledge and which were necessary in order to proceed further in this issue. 3. We have considered the rival submissions. The short point to be decided in this case is as to whether during the period of dispute, the amount reimbursed by the appellant to their dealers for providing free after sale service to the customers, is includible in the assessable value of the goods cleared by the appellant to their deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the assessee for after sale service during the warranty period, after delivery of motorcycles to the ultimate buyers is a consideration on the sale of motorcycle by the appellant to the dealers, and therefore, its money value must be included in the assessable value. But, it is not the Revenue's case that dealers are recovering the after sale service charges from the customers and passing on the same to the appellant. It is also not the Revenue's case that as per the appellant's agreements with the dealers, the dealers are legally bound to provide free after sale service to the customers on behalf of the appellants for which they are not reimbursed. Since, the dealers are being reimbursed by the appellant for the free after sale service being provided by them to the ultimate customers, the same cannot be said to be an additional consideration. The sale consideration is what flows from the buyer to the seller and not what the seller gives to the buyer. Since, the appellant are bearing the cost of free after sale service, there is no question of adding the same to the assessable value, even if the sale price is below the cost, as it is a settled law, as held by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee includes all their costs incurred in relation to manufacture and marketing while fixing price payable for the goods and bills and collects an all inclusive price-as happens in most cases where sales are to independent customers on commercial consideration-valuation should not pose any problem as the transaction price will generally be the assessable value. Nevertheless, there could be situations where the amount charged by an assessee does not reflect the true intrinsic value of goods marketed and total value split up into various elements like special packing charges, warranty charges, service charges etc. These cases would require to be scrutinized carefully to ensure that duty is paid on correct value. Such elements have been held to be includible in the assessable value under erstwhile Section 4 by various court pronouncements, notably, the Supreme Court's judgment in MRF case. Now the definition of 'transaction value' makes it clear that all the elements of cost which the assessee incurred till the sale/marketing as aforesaid, continue to be included in the assessable value even under new Section 4." According to the learned Counsel what was required to be inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead that rule to see whether the clarification flows from the words of that Rule either. "Rule 6. Where the excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of Section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee". (emphasis supplied). 8. The reading of the above Rule makes it clear that "money value of any additional consideration flowing directly or indirectly from the buyer to the assessee" is required to be added. In other words, the criterion is the same under Rule 6 also i.e. amount of "money value of any additional consideration flowing directly or indirectly from the buyer to the assessee" should be added to the transaction value to find out the aggregate value of the goods. Again, additional consideration should be flowing "directly or indirectly from the buyer to the assessee". Thus, the definition and Rule 6 will have no application to considerations not flowing to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
