After-sales service charges excluded from excise valuation where dealer sales are principal-to-principal and price is sole consideration.

After-sales service labour charges reimbursed to servicing dealers or authorised service centres were not includible in the assessable value of motor vehicles. The dealership arrangement was on a principal-to-principal basis, with title passing at the factory gate and resale by dealers on their own account, so post-clearance service expenditure was not part of the manufacturer's pre-clearance production cost or sale price. The manufacturer's price remained the sole consideration for the sale, and the departmental additions were unsustainable.

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Issues: Whether the labour charges reimbursed by the manufacturer to servicing dealers or authorised service centres for free after-sales services were includible in the assessable value of motor vehicles cleared to dealers.

Analysis: The dealership arrangement showed sales to dealers on a principal to principal basis, with title passing at the factory gate and resale by dealers at their own risk and cost. The obligation to provide service facilities arose under the dealership terms, but the expenditure incurred after clearance of the goods was borne in the course of the dealer network arrangement and not as part of the manufacturer's pre-clearance production cost. The presence or absence of particular words in different clauses of the agreement did not alter the substance of the transaction. On the facts, the post-removal service expenditure could not be treated as part of the price of the goods for valuation purposes.

Conclusion: The after-sales service labour charges were not includible in the assessable value, and the additions made by the departmental authorities were unsustainable.

Ratio Decidendi: For excise valuation, expenditure incurred after clearance of goods in respect of dealer-provided after-sales services is not includible in assessable value where the sale to the dealer is on a principal to principal basis and the manufacturer's price is the sole consideration for the sale.

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