2022 (4) TMI 1539 - AT - Central Excise

Excise Duty Appeal Victory: PDI and ASS Costs Excluded from Assessable Value

The Tribunal allowed the appeal by M/s General Motors India Private Limited, holding that the cost of 'pre-delivery inspection' (PDI) and free 'after-sale ... Recovery of Central Excise Duty alongwith interest and penalty - correctness of the inclusion of cost of ‘pre-delivery inspection’ and free ‘after-sale service’ undertaken by ‘dealers’ of the appellant in the assessable value - period from April 2010 to December 2010 - HELD THAT:- In COMMISSIONER OF CENTRAL EXCISE, MYSORE VERSUS M/S TVS MOTORS COMPANY LTD. [2015 (12) TMI 874 - SUPREME COURT], the inclusion of expenses incurred by the dealers on ‘pre-delivery inspection’ and ‘after-sale service’ in assessable value had been set aside with the finding that where the manufacturer has sold his goods to his dealer and wholesale dealer thereafter does ASS to the customer 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. This is more so, where the ASS is done by the dealer many weeks after the goods have been sold to him by the manufacturer. Such a post-sale activity undertaken by the dealer is not relevant for the purpose of excise since the goods have already been marketed to the dealer. Appeal allowed. Issues Involved:1. Correctness of the inclusion of the cost of 'pre-delivery inspection' (PDI) and free 'after-sale service' (ASS) in the assessable value for excise duty purposes.Issue-wise Detailed Analysis:1. Correctness of the inclusion of the cost of 'pre-delivery inspection' (PDI) and free 'after-sale service' (ASS) in the assessable value for excise duty purposes:In this appeal, the primary issue is whether the cost of 'pre-delivery inspection' (PDI) and free 'after-sale service' (ASS) undertaken by dealers should be included in the assessable value for excise duty purposes. The appellant, M/s General Motors India Private Limited, contested the order-in-original which demanded the recovery of tax liability amounting to Rs. 1,05,51,675/- along with interest and penalties.The appellant argued that no payment was made to the dealers for these services, which were performed as part of the dealers' contractual obligations. They contended that the central excise authorities' valuation was based on unwarranted presumptions and was not in conformity with Section 4 of the Central Excise Act, 1944. The appellant relied on the Supreme Court's decision in Commissioner of Central Excise, Mysore v. TVS Motors Co Ltd and the Tribunal's decision in M/s Tata Motors Ltd v. Commissioner of Central Excise, Pune – I, which had set aside the inclusion of such expenses in the assessable value.The Tribunal referred to the Supreme Court's judgment in TVS Motors Co Ltd, which clarified that PDI and ASS provided by dealers during the warranty period should not be included in the assessable value. The judgment emphasized that the statutory provisions and circulars issued prior to 2000 were different from those post-2000, and the inclusion of PDI and ASS costs was not warranted under the amended Section 4 of the Central Excise Act, 1944.The Tribunal also considered the Bombay High Court's decision in Tata Motors Ltd. v. Union of India, which struck down the circular that attempted to include PDI and ASS costs in the assessable value. The High Court observed that the definition of 'transaction value' under Section 4(3)(d) did not support the inclusion of such expenses, as they were not amounts charged by the manufacturer to the dealer or customer. The High Court concluded that the expenses incurred by dealers for PDI and ASS were part of the dealer's responsibilities under the dealership agreement and not part of the transaction value.The Tribunal agreed with the High Court's interpretation and noted that the services provided by dealers were on their behalf and not on behalf of the assessee. The Tribunal highlighted that the definition of 'transaction value' included amounts charged by the manufacturer to the buyer, but since the manufacturer did not charge the dealer for PDI and ASS, these costs could not be included in the assessable value.Finally, the Tribunal referred to the Supreme Court's decision, which overruled the Larger Bench's view in Maruti Suzuki Ltd v. Commissioner of Central Excise, Delhi – III and upheld the exclusion of PDI and ASS costs from the assessable value. The Tribunal concluded that the impugned order was incorrect and set it aside, allowing the appeal in favor of the appellant.Conclusion:The Tribunal set aside the impugned order and allowed the appeal, holding that the cost of 'pre-delivery inspection' (PDI) and free 'after-sale service' (ASS) should not be included in the assessable value for excise duty purposes. This decision was based on the Supreme Court's and Bombay High Court's interpretations of the statutory provisions and the definition of 'transaction value' under Section 4 of the Central Excise Act, 1944.