Assessable value excludes dealer-borne pre-delivery and after-sales costs when no reimbursement forms part of sale consideration.

Dealer-incurred pre-delivery inspection and free after-sales service charges do not form part of the assessable value of motor vehicles under Section 4(1)(a) read with Section 4(3)(d) of the Central Excise Act, 1944, where the assessee and buyer are unrelated and the price is the sole consideration. Only amounts actually charged by, payable to, or payable on behalf of, the assessee in connection with the sale can enter transaction value. Expenses independently borne by the dealer under the dealership arrangement, without reimbursement or separate recovery from the assessee, fall outside assessable value, and Rule 6 cannot be used to enlarge it.

---

---

Issues: Whether the cost of pre-delivery inspection and free after-sales services incurred by the dealer can be included in the assessable value of motor vehicles under the amended valuation provisions of the Central Excise Act, 1944, so as to sustain the impugned circulars.

Analysis: Section 4(1)(a) applies where the assessee and buyer are not related and the price is the sole consideration; in such cases, assessable value is the transaction value under Section 4(3)(d). That definition includes only amounts actually paid or payable to, or on behalf of, the assessee by reason of, or in connection with, the sale. The dealer's obligation to perform pre-delivery inspection and free after-sales services arose from the dealership arrangement and was discharged by the dealer at its own cost, without any reimbursement or separate charge by the assessee. Those expenses were not shown to be amounts charged by the assessee, amounts payable to the assessee, or amounts payable on the assessee's behalf. The invocation of Rule 6 of the valuation rules was therefore misplaced, because the sale fell under Section 4(1)(a) and not a deemed valuation regime. The later circular confirming exclusion of such charges during the warranty period also showed that the dealer-incurred expenses were not part of the assessee's sale consideration.

Conclusion: The impugned circulars were inconsistent with Section 4(1)(a) read with Section 4(3)(d) of the Central Excise Act, 1944 to the extent they directed inclusion of dealer-incurred pre-delivery inspection and free after-sales service charges in assessable value. The issue is answered in favour of the assessee and against the Revenue.

Final Conclusion: Dealer-incurred pre-delivery inspection and free after-sales service charges cannot be added to the assessee's assessable value unless such charges are actually recovered by the assessee from the buyer as part of the sale consideration.

Ratio Decidendi: Under Section 4(1)(a) read with Section 4(3)(d) of the Central Excise Act, 1944, only amounts charged by the assessee or payable to, or on behalf of, the assessee in connection with the sale form part of transaction value; dealer-incurred post-sale obligations borne independently by the dealer do not.

---