2014 (10) TMI 764 - AT - Central Excise

Inclusion of Promotional Schemes in Assessable Value for Excise Duty

M/s Maruti Suzuki India Ltd. (Gurgaon Plant) Versus CCE. Delhi-III, Gurgaon

M/s Maruti Suzuki India Ltd. (Gurgaon Plant) Versus CCE. Delhi-III, Gurgaon - 2015 (315) E.L.T. 597 (Tri. - Del.) Issues Involved:1. Inclusion of dealer's contribution in promotional schemes in the assessable value.2. Applicability of extended period for demand under Section 11A(1) of the Central Excise Act, 1944.3. Interpretation of 'transaction value' under Section 4(3)(d) of the Central Excise Act, 1944.Issue-wise Detailed Analysis:1. Inclusion of Dealer's Contribution in Promotional Schemes in the Assessable Value:The appellant, engaged in manufacturing and selling motor vehicles, provided various promotional schemes through its dealers. The central issue was whether the dealer's contribution to these schemes should be included in the assessable value for excise duty purposes. The adjudicating authority held that the discounts borne by the dealers were a flow of consideration to the appellants by reason of, or in connection with, the sale of vehicles, thereby includible in the assessable value under Section 4 of the Central Excise Act, 1944.The appellant argued that discounts should be deductible from the assessable value, citing the Supreme Court's decisions in Union of India vs. Bombay Tyres International Ltd. and Philips India Ltd. They contended that since no extra consideration flowed from the dealers to them, and the discounts were passed on to customers, these should not be included in the assessable value.However, the tribunal noted that the transaction value includes any amount a buyer is liable to pay by reason of or in connection with the sale, including amounts paid on behalf of the assessee to the dealer. The tribunal found that the promotional discounts were given under an understanding between the manufacturer and the dealer, forming part of the assessable value. The tribunal also referenced the Maruti Suzuki India Ltd. case, where similar dealer contributions were included in the assessable value.2. Applicability of Extended Period for Demand under Section 11A(1) of the Central Excise Act, 1944:The appellant raised an issue on the limitation, arguing that the department was aware of the promotional schemes. The tribunal, however, found that the dealers were charging handling charges over and above the ex-showroom price, which was not disclosed to the department. This non-disclosure justified the invocation of the extended period for demand under Section 11A(1) of the Act.3. Interpretation of 'Transaction Value' under Section 4(3)(d) of the Central Excise Act, 1944:The tribunal examined the definition of 'transaction value' under Section 4(3)(d), which includes the price paid for the goods and any amount the buyer is liable to pay to or on behalf of the assessee by reason of or in connection with the sale. The tribunal concluded that the transaction value is not confined to the amount paid directly but includes any indirect benefit received by the assessee in connection with the sale, such as promotional discounts borne by dealers.The tribunal held that the discounts offered by dealers were in connection with the sale and were a booster to the appellant's sales. Therefore, they were includible in the assessable value. The tribunal also referenced the Supreme Court's rulings that any legally enforceable right against the customer in relation to the sale must be included in the assessable value.Conclusion:The tribunal directed the appellant to deposit Rs. 150 crores within eight weeks and stayed the realization of the balance amount of duty, interest, and penalties until the disposal of the appeal. The tribunal's decision emphasized the broad interpretation of 'transaction value' and the inclusion of dealer contributions in promotional schemes in the assessable value for excise duty purposes.