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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 ..... cording to Learned Counsel for appellant, no payment has been made to 'dealers' and valuation of these services, which devolves by contractual obligation on them in their agreements, renders the cost computation, based on unwarranted presumptions on the part of central excise authorities, to be not in conformity with section 4 of Central Excise Act, 1944. It was contended that the reliance placed by the adjudicating authority on circular no. 643/34/2002-Cx dated 1st July 2002, read with circular no. 681/72/2002-Cx dated 12th December 2002 of Central Board of Excise and Customs, and on decision of the Larger Bench of the Tribunal in Maruti Suzuki Ltd v. Commissioner of Central Excise, Delhi - III [2010 (257) ELT 226 (Tri.-LB)] is inappropriate considering that the issue stands settled by the decision of the Hon'ble Supreme Court in Commissioner of Central Excise, Mysore v. TVS Motors Co Ltd [2016 (331) ELT 3 (SC)] which has been followed by the Tribunal in a similar dispute of tax authorities in M/s Tata Motors Ltd v. Commissioner of Central Excise, Pune - I [final order no. A/87305-87309/2019 dated 11th December 2019 disposing off excise appeal no. 862 of 2009 as well as others]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the considerations for sale of the goods (motor vehicles, consumer items etc.) to the dealer and will therefore be governed by Rule 6 of the Valuation Rules on the same grounds as indicated in respect of Advertisement and Publicity charges. That is, in such cases the after sales service charges and PDI charges will be included in the assessable value. 15. The aforesaid clarification, if that was to be acted upon, may go in favour of the Department. However, it is pertinent to point out that this very clarification as given by the Board was challenged in the High Court of Bombay and in the judgment rendered by the Bombay High Court in the case of Tata Motors Ltd. v. Union of India - 2012 (286) E.L.T. 161 (Bom.), the same was struck down by making following pertinent observations : 41. In our view, the only question which fell for consideration of this Court was whether Clause 7 of Circular dated 1st July, 2002 is in excess of the provisions of Section 4(1)(a) and 4(3)(d) of said Act as amended by Section 94 of the Finance Act of 2000. In our view, the answer to this question will decide the issues as between the petitioners and the respondents. In our view, it is not nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged for or to make provision for certain items such as advertising etc. One such item is servicing. In view of the definition of the term transaction value, it would be necessary for this Court to apply the definition of the term "transaction value" to the facts of this case and decide the matter. It is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es is borne out of retailing profit. The contention of the respondents that the expenses incurred for PDI and said services must be included in the transaction value and is required to be included in the assessable value of the car is required to be negatived on the ground that the petitioners do not charge the dealer any amount equivalent to the cost incurred towards PDI and free after sales services. 44. It has been the contention of the respondents that the petitioners provide warranty in regard to the car which is sold by the dealer to the customer. According to the respondents the customer can avail of the benefit of this warranty, provided PDI is carried out in respect of the car and the customer avails of the benefit of said services. According to the respondents the warranty given by the petitioners is linked with expenses incurred towards PDI and said services and that is how the expenses incurred for PDI and said services become a part of the transaction value. We are not inclined to accept this contention. It is true that the Owner's Manual specifically indicates that if the PDI and said services are not availed of, then the customer would not be able to claim the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are giving trade discount to the dealer, the petitioners are paying the Excise amount on the whole amount and not the amount which is arrived at after giving the trade discount. Learned Senior Counsel Mr. Sridharan's submission in terms of judgment in the case of Atic Industries Ltd. v. H.H. Dave, Assistant Controller of Central Excise and Ors. reported in 1978 (2) E.L.T. (J444) S.C. that the price which is relevant for the purpose of Excise duty was the price when the good first entered in the stream of trade is required to be accepted. In the present case, when the petitioners sell the car to the dealer, the goods enter the stream of trade for the first time and, therefore, the amount at which the car is sold to the dealer would be the assessable value on which the Excise duty would be payable. In the present case, the expenses incurred by the dealer for PDI and said services has nothing to do with the term "servicing" mentioned in the transaction value and as such, the said expenses cannot be added to assessable value. 45. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of factors like advertising or publicity, marketing and selling organization expenses, storage and outward handling etc. will also be part of the transaction value. In fact, most of the charges that are recovered on account of the specific activities by advertising or publicity, etc. mentioned in the definition of transaction value are includable in the computation of 'value' under the existing section. 4. As such, the definition of transaction value does not seem to be divergently wider in content and scope from the interpretation of 'value' under existing Section 4. The definition of 'transaction value' should help set at rest any doubt regarding amounts that are charged or recovered from the buyer in respect of specific kind of operations done by the assessees. In essence, whatever is recovered from the buyer by reason of, or in connection with the sale, whether payable at the time of sale or at any other time is included in the transaction value (emphasis supplied)" 18. This very position is reiterated by the Board in its circular Letter F. No. 354/81/2000-TRU, dated 30-6-2000 which gives clause by clause explanation of the Section. Relevant extract from the same is rep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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