2000 (7) TMI 643 - AT - Central Excise

Tribunal excludes PDI costs from assessable value of motor vehicles in wholesale trade

HINDUSTAN MOTORS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, CALCUTTA

HINDUSTAN MOTORS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, CALCUTTA - 2001 (136) E.L.T. 69 (Tri. - Kolkata) Issues:1. Inclusion of cost of Predelivery Inspection (PDI) and initial service in assessable value of motor vehicles sold to dealers in wholesale trade.Analysis:The dispute in this appeal revolved around whether the cost of Predelivery Inspection (PDI) and the three initial services incurred by the dealer for vehicles resold to customers should be included in the assessable value of motor vehicles sold to dealers in wholesale trade. The appellant, a manufacturer of motor vehicles, primarily sold vehicles to dealers who then resold them to customers. The sales were made at wholesale prices to dealers and under contract to Government Departments. The running-in services, including PDI and three initial services, were essential for the smooth functioning of the vehicles and were included in the retail price by the dealer. The Revenue contended that these costs should be included in the assessable value, leading to a substantial demand and penalty on the appellant.The appellant argued that the after-sales services were part of a bilateral relationship between dealers and customers, and the manufacturer had no direct involvement in them. The cost of these services was covered by the dealer's margin and should not be included in the assessable value. The appellant relied on legal precedents, including a Supreme Court judgment and a decision of the Delhi Bench of the Tribunal, to support their position. They emphasized that the value related to after-sales services was not recovered by the appellant, strengthening their case compared to previous rulings.The Tribunal, after considering the arguments and relevant case law, found that the issue had already been settled by a previous decision of the Delhi Bench of the Tribunal, which had been upheld by the Supreme Court. As the previous decision had the seal of approval from the Apex Court, it held precedence. The Tribunal concluded that the appeal deserved to be allowed on merits, as the inclusion of the cost of after-sales services in the assessable value was not justified. Therefore, the Tribunal set aside the impugned order and allowed the appeal on its merits, without delving into the appellant's plea regarding limitation.In summary, the Tribunal ruled in favor of the appellant, holding that the cost of Predelivery Inspection (PDI) and initial services should not be included in the assessable value of motor vehicles sold to dealers in wholesale trade, based on established legal precedents and the specific circumstances of the case.