TMI Blog2005 (1) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... rest and penalty. The reason for the duty demand is that the appellant did not determine the assessable value of the motor vehicles correctly by including amounts collected under service contracts also in the assessable value. The present appeal challenges that order. 2. The contention of the appellant is that amounts collected under the service agreement with the buyers is not a consideration for the sale of the motor vehicles or, for that matter, they are amounts paid or liable to be paid "by reason of" "or in connection with" the sale of the motor vehicles. It is being pointed out that the services rendered in terms of the service agreement are for the maintenance of the vehicles, after their sales and they have nothing to do with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e current Section in the Central Excise Act. Learned Counsel has pointed out that even in terms of the Section which came into force from 1-7-2000, only "Servicing" which is "by reason of and or in connection with the sale would be liable to be included in the assessable value". In the present case, as the servicing is not in connection with the sale, there is no warrant for including the service charge even subsequent to 1-7-2000. Learned Counsel has in this connection referred to the decision of the Apex Court in the case of Acer India Ltd. - 2004 (172) E.L.T. 289 (S.C.) = 2004 (64) RLT 539 (S.C.) in support of his contention that the service charge is not to be included. Reliance in particular has been made on para 78 of the judgment whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held to have correctly been rendered". 5. The contention of the learned Senior Counsel for the Revenue is that "servicing" is a specifically included item in the definition of transaction value under Section 4 of the Central Excise Act and that a perusal of the connected documents revealed that the service agreement is in connection with the sale of the motor vehicles. Learned Senior Counsel has also contended that the optionality of the service agreement or some people not making payments under the agreement are not relevant for the purpose of determining the assessable value since the statutory provision has specifically included the cost of servicing in the assessable value. It has also been pointed out that a perusal of the relevant d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicates that the 'disturbances' and the 'situation' must be proximately connected as cause and effect. The 'situation' envisaged by this sub-section, therefore, may not necessarily be coterminous with the disturbances. It is sufficient if the situation is the immediate outcome of the disturbances, and it subsists. The situation after such massive and violent disturbances would continue to be 'disturbed' for some time even after the abatement or overt cessation of the disturbances". Based on the above ruling of the Hon'ble Supreme Court, it is the contention of the learned Senior Counsel that a proximate connection between the cause and effect would be sufficient to satisfy the condition of "by reason of". According to him, in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... citation "that the Customer has sought and Volvo has agreed to provide or procure the provisions of preventive maintenance/repairs for the vehicle (identified in the agreement hereto) upon the terms and conditions mentioned under this agreement and the schedule hereto". Thus, it is a service sought by the customer and provided by Volvo. It is not a part of or implicit in the sale and purchase of the vehicle. There is, of course, "servicing" which forms part of the sale consideration and that is the free service which is available to every purchaser "by reason of" the purchase of the vehicle on completion of 10,000 Kms. or four weeks of run. This service is part of the sale consideration and its value remains included in the sale price. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of the vehicle. It is an entirely different activity. Only the service provided by reason of the sale or in connection with the sale can alone be included in the sale transaction. In the present case that servicing is the free service provided upon 10,000 Km. run and not the life-time service procured through a separate agreement. 9. In Philips India Limited v. CCE, Pune reported in 1997 (91) E.L.T. 540 (S.C.) = 1997 (6) SCC 31, dealing with the question of includibility of advertisement expenditure by dealer in the assessable value of electronic goods, the Apex Court again cautioned as under :- "7. We think that in adjudicating matters such as this, the Excise authorities would do well to keep in mind legitimate business considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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