TMI Blog2023 (11) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... mbursed to him). It is also not made clear, in the show-cause notice, as to whether the amounts reimbursed, by the appellants to their dealers, were towards PDI and ASS. Moreover, the show-cause notice seeks to demand duty on the expenses, understandably incurred by the appellants, reimbursed to the dealers. It is beyond imagination as to how these amounts constitute flow of additional consideration unless it is evidenced either that the appellants are allowing the dealers to collect the margin payable, by the appellant to the dealers, from ultimate customers or that the additional amounts charged by the dealers from ultimate customers is actually flowing back to the appellants. Only under these two conditions the said expenses can be held includable in the assessable value even under the old or amended definition of Section 4 of CEA, 1944 - there is no provision either under Section 4 of the CEA, 1944 or under the Valuation Rules thereof to include an amount which flows out from the manufacturer to their customers. It is not the case of the Department that the appellants, instead of reimbursing the expenses on account of PDI and ASS, allowed the dealers to recover the same from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice dated 07.09.2011 was issued and was confirmed by the impugned order dated 31.07.2012 confirmed demand of Rs.1,31,15,550/- along with interest and equal penalty. 2. Ms. Krati Singh, learned Counsel for the appellant, submits that the issue is no longer res integra as it has been held in a number of cases that the cost of after-sale service is not includable in the assessable value. She submits that such expenses are incurred by the dealers after appellant has sold his goods to the dealers; the dealer thereafter provides the service to the customers, in terms of the dealership agreement, and incurs expenditure; therefore, it cannot be added back to the sale price charged by the manufacturer from the dealer for computing the assessable value; thus, the price paid by the dealers to the appellant is the sole consideration for computation of assessable value in terms of Section 4(3) of the Excise Act and no additional consideration is provided by the appellant. She relies upon the following: General Motors India Pvt. Ltd.- 2022 (4) TMI 1539- CESTAT MUMBAI. Skoda Auto Volkswagen India Pvt. Ltd.- 2021 (12) TMI 239- CESTAT MUMBAI. Tata Motors Ltd.- LTU 2019 (TMI) 1647- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer is Rs.41,239.24/-; therefore, it is evident that the PDI and after sale service charges have been collected by the dealers from the customers on behalf of the appellant and the price at which the appellants have cleared the goods to the dealers is not the sole consideration for the sale of the said vehicle. He submits that the after-sale services provided by the dealers are included in the dealers margin collected from the ultimate customers and are not reimbursed by the appellants; referring to Para 17.3 of the impugned order, he submits that the appellants in their reply to the show-cause notice stated that PDI and ASS are included in the dealers margin; therefore, the same should be included in the assessable value. 6. Learned Authorized Representative further submits that in terms of Clause 43 of the Agreement between the appellant and the dealers, it was obligatory on the part of the dealer to ensure PDI and ASS in accordance with the standards, requirement and the policies of the appellant; it is clear that the appellant has direct supervision control over the activities of the dealers; the charges for PDI and ASS are absorbed in the dealers margin or fixed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and perused the records of the case. We find that the show-cause notice mentions at Para 2 that: During the course of audit of the Noticee s records by the Internal Audit Team of the Commissionerate from 19th to 22nd January 2011, it was noticed that the Noticee was not including the After Sales expenses reimbursed to the dealers in the assessable value. It is a well-known fact in case of motor vehicles manufacturers that After Sales service and pre-delivery inspection (PDI) are services provided free by the dealer on behalf of the assessee, the cost towards this is included in the dealer s margin (or reimbursed to him). This is 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 Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (hereinafter referred to as the Valuation Rules 2000). That is, in such cases the after-sales service charges and PDI charges will be included in the assessable value. 9. Further, we find that the Department called for after sale expenses reimbursed to the dealers for the period 2006-07 to 2010- 11 which were submitted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the dealers to collect the margin payable, by the appellant to the dealers, from ultimate customers or that the additional amounts charged by the dealers from ultimate customers is actually flowing back to the appellants. Only under these two conditions the said expenses can be held includable in the assessable value even under the old or amended definition of Section 4 of CEA, 1944. We find that Adjudicating Authority also finds at Para 17.3 of the impugned order as follows: I find that from the perusal of Rule 6 ibid and Clause (a) of sub section (1) of section 4 of the CEA 1944 it becomes clear that the After Sales expenses reimbursed to the dealers by the Noticee were includible in the assessable value and by not doing so the Noticee had short paid excise duty on under-valued finished goods which were manufactured and cleared by them. In their reply to the SCN s has inter-alia, submitted that the said PDI and after sale charge are included in the Dealer s margin and that the Dealer margin cannot be added to the Transaction value. I find that the said PDI and three free services and necessary on the part of a customer to remain eligible for any claim under warranty. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the records of the case that the amount recovered by the dealers over and above the listed price sanctioned by the appellants is towards the amount reimbursable by the appellants to the dealers. It is also not established that the amount extra collected is towards the PDI and ASS. There is no evidence to prove that the amount charged extra by the dealers is flowing back towards the appellant. In view of this, we find that the impugned order as well as the arguments of the learned Authorized Representative and to some extent, argument of the Counsel also is beyond the scope of the show-cause notice. No case is made for the inclusion of after sale expenses reimbursed to the dealers by the Noticee except for a bland averment in Para 2 of the show-cause notice that it is a well-known fact in case of motor vehicles manufacturers that After Sales service and pre-delivery inspection (PDI) are services provided free by the dealer on behalf of the assessee, the cost towards this is included in the dealer s margin (or reimbursed to him).It is not evidenced that the appellants instead of paying the dealers have allowed or authorized them to recover the amounts, towards the expenses inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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