2006 (5) TMI 227 - AT - Central Excise

Manufacturer prevails in assessable value dispute for tractor sales. Dealers not agents, no commission. Tribunal dismisses revenue appeal.

The Tribunal ruled in favor of the manufacturer in a case concerning the assessable value determination for tractors sold to dealers for Central Excise ... Valuation Issues:1. Assessable value determination for tractors sold by manufacturer to dealers.2. Inclusion of dealers' margin in assessable value for Central Excise duty.3. Interpretation of Circular dated 17-10-96 regarding dealers' margin.Analysis:1. The case involved the determination of the assessable value for tractors sold by the manufacturer to dealers, which are subject to Central Excise duty based on their value. The manufacturer adopted the sale price to the dealers as the assessable value for discharging the duty.2. Two show cause notices were issued to include the margin of the dealers in the assessable value, alleging that the dealers were agents of the manufacturer, and the agent's commission should not be deducted. However, upon adjudication, it was found that the dealers bought the tractors on an outright purchase basis, sold them after charging their margin, and no commission was being paid by the manufacturer to the dealers. Consequently, the duty demands were dropped by the adjudicating authority.3. The revenue filed an appeal before the Commissioner (Appeals) challenging the adjudication order. The Commissioner upheld the revenue's contention that dealers were receiving commission based on a Circular dated 17-10-96 issued by the manufacturer. The Circular advised dealers to charge a margin while reselling the tractors, considering their expenses. However, upon perusal of the Circular, it was determined that the transaction between the manufacturer and the dealers was on a principal-to-principal basis, not involving commission payments.4. The Circular did not support the argument that the dealers were commissioning agents, as it clearly indicated that the buyers were dealers who were to charge a margin while reselling the tractors. The transaction was deemed as outright sales on a principal-to-principal basis, aligning with Section 4 of the Central Excise Act, which determines the normal sale price of a manufacturer as the assessable value. The resale price of goods was irrelevant for excise duty unless the first sale was affected by specific factors, which was not the case here.5. Consequently, the Tribunal found no merit in the revenue's case and allowed the manufacturer's appeals, providing consequential relief if necessary. The judgment emphasized the nature of the transaction between the manufacturer and the dealers as outright sales, dismissing the inclusion of dealers' margin in the assessable value for Central Excise duty.