TaxTMI 
TaxTMI 
2015 (12) TMI 940
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....by Revenue. MISC Application No.E/MISC/235/2013 in Appeal E/1265/2004 is filed by assessee for taking into account the additional grounds. The same is allowed. The other application E/MISC/42440/2013 in E/473/2012 is filed by assessee for granting extension of stay. As the appeal itself is being disposed, the MA is disposed. 3. E/MISC/234/2013 in E/1312/2004 is filed by Revenue for change of cause title so as to change the appellant s name from Commissioner of Central Excise, Chennai-IV to "Commissioner of Central Excise & Service Tax, LTU, Chennai" as the assessee is falling under the jurisdiction of LTU, Chennai. Accordingly MA No.E/MISC/234/2013 is allowed. 4. Now, we proceed to take up the appeals. The brief facts of the case are that M/s Hyundai Motors India Ltd (hereinafter referred to as HMIL) are manufacturers of motor vehicles (passenger cars) falling under Chapter Heading 8703 and commenced commercial production from Sept'1998 onwards. The assessees cleared the cars to their dealers as well as through their depot located across the country. Since the assessees were not able to determine the actual price on various cost details and other charges, discounts ....
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.... (Appeals) partly allowed the appeals. Hence, Revenue filed appeal E/398/09 against OIA No.64/2008 dt. 30.3.2009 and appeal E/399/2009 against OIA No.59/2008 dt. 30.3.2009. These two appeals are filed by Revenue against dropping of demand in the issues referred at para-4 above. E/44/2010 & E/45/2010 (by Revenue) 8. These two appeals are filed by Revenue against OIA No.59/2009 and OIA No.60/2009 both dt. 3.11.2009 respectively on the identical issue as at para-4 above wherein the Commissioner (Appeals) has partly allowed the appeal and the Revenue preferred appeals against demand on five issues viz. (i) valuation on demo cars, (ii) PDI/ASS charges (iii) overriding commission on CSD (iv) cost of delivery kits (v) incentive trip recovered from dealers except the other two issues ie. cenvat credit on structurals used on fabricated paint complex and non-inclusion of profit margin at HMP. E/487 to 489/2011 & E/473/2012 (filed by HMIL) 9. Appeal Nos. E/487 to 489/2011 are filed by the assessee against OIO No.LTUC/260-262/2011 (C) dt. 4.8.2011 passed by Commissioner, LTU Chennai. Appeal No.E/473/2012 is filed by assessee against OIO No. LTUC/280/2012-C dt. 31.8.2012. All these ....
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.... Bangalore-LTU 2014 (306) ELT 504 (Tri-Bang) CONTENTION BY REVENUE 12. The Ld. A.R had filed a written submission dated 21.5.2015 and placed heavy reliance on the decision of Larger Bench in the case of Maruthi Suzuki India Limited vs CCE, Delhi-III - 2012 (257) ELT 226(Tri-LB) and also relied the following case laws :- a) Union of India and Others Vs Bombay Tyre International Ltd 1984 (14) ELT 1896 (SC) b) CCE, Mumbai Vs Fiat India Private Ltd 2012 TIOL 58 SC CX , 2012 (283) ELT 161 (SC) 12.1. The Learned authorized representative (AR) submitted that the reliance placed on the Bombay High Court judgment in the case of Tata Motors is incorrect for the reason that the Bombay High Court was specific to the facts of that case and the assessee therein and Bombay High Court s decision had been challenged by the Revenue and is pending before the Hon'ble Supreme Court. Reference is SLP (Civil) 3501 of 2013 which is converted to a Civil Appeal No.2204 of 2013 and this appeal is connected to Civil Appeal No.3768 and 3769 of 2011 in the case of M/s Tractors and Farm Equipments Ltd. 12.2. The learned AR further placed reliance on the judgment of the Hon'ble Supre....
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....r the transaction value on principal to principal basis. He also submits that after 01.07.2000, each removal should be treated as an independent price. Therefore, the demo cars, though the price is discounted the same is reimbursed to the dealer. The department enhanced the value at par with the normal cars as per the Board s Circular dated 01.04.2003, which is not justified. He also submits that in certain cases, the sale price of the demo cars is higher than the normal cars, which was recorded in appeal nos.E/398,399/2009. He also submits that subsequent sale of demo car cannot be equated with sale of normal cars. CONTENTION OF REVENUE 16. The A.R. submits that the discounts vary between 15% and 20%. Reliance was placed on Board s clarification contained in F.No. 6/40/2002 CX-1 dated 1.4.2003 and submits that the issue is already decided by this Tribunal in the case of Royal Enfield Vs CCE Chennai reported in 2012 (280) ELT 92 (Tri-Chennai) and two judgments in the case of Ford India Pvt. Ltd Vs CCE, Chennai reported in (i) 2010-TIOL-329-CESTAT-MAD and (ii) 2014 (302) ELT 257 (Tri-Chennai). Further, he submits that the Hon'ble Supreme Court dismissed the civil appeal fi....
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....ase of Mahavir Spinning Mills Vs CCE, Jalandar reported in 2007 (207) ELT 94 (Tri-Del) which was upheld by the Apex Court in its judgment in the case of Commissioner Vs Mahavir Spinning Mills reported in 2007(212) ELT A152 (SC). He also placed reliance on the judgment in the case of Steel Authority of India Vs CCE, Raipur reported in 2006(199) ELT 112(Tri-Del). CONTENTION OF REVENUE 20. The leaned AR reiterated the grounds of appeal and placed reliance on the findings given by the adjudicating authority to the effect that discount passed on through credit notes were relating to subsidy paid under Car Exchange Scheme, irrespective of Model and Make and subsidy of interest for the loan given to the customer. ISSUE NO. 7 Incorrect availment of Cenvat credit on fabricated paint shop structural: CONTENTION OF HMIL 21. The Ld. counsel submits that the Adjudicating authority denied the credit on the structurals, pre-fabricated buildings used in their paint shop. These are nothing but accessories of capital goods. The appellate authority allowed the credit and he reiterated the findings of LAA. He submits that all the structurals and accessories are classifiable under 82,....
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.... the 7 issues referred at para-4 above. Further, we find that the subsequent years 2008-09 and 2009-10, the Commissioner, LTU Chennai adjudicated the case and confirmed the demand including charges of PDI/ASS and also imposed penalty and the assessee preferred appeal. We also find that the period of dispute starts from 1998 to Sept 2011 and covers both pre-amended and post-amended Section 4 (w.e.f. 1.7.2000). We propose to discuss the issues as under : 25. Issue - PDI/ASS charges. We find that the adjudicating authority has included the cost of Pre-Delivery Inspection charges and After Sales Services charges while finalizing the provisional assessment and the LAA had set aside the inclusion of PDI/ASS charges. On perusal of the OIAs, we find that lower appellate authority had discussed the issue in detail and relied case laws pertaining to pre-amendment period prior to 1.7.2000 and post-amendment of Section 4. We find that Revenue in their grounds of appeal, mainly contended and relied the Board s circular No.643/34/2002-CX dt. 1.7.2002 and Circular No.681/72/2002-CX dt. 12.12.2002. Further, the jurisdictional Commissioner, LTU also issued SCN and confirmed the demands on PDI....
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.... TMLD to dealers. The petitioners claim that there is no dispute between the parties that the petitioners have correctly paid Excise duty on this basis. The petitioners have appointed various persons as dealers who sell the cars in turn to their customers. ... ... .... 35. The amendment to Section 4 of said Act came into effect on 1st July, 2000. The respondents thereafter issued Circular No. 643/34/2002-CX., dated 1st July, 2002. In Clause No. 7 the respondents clarified its stand about the cost of PDI and said services incurred by the dealer during the warranty period. The relevant portion of the Circular is as under : Clarifications on points of doubt under the New Valuation provisions introduced w.e.f. 1-7-2000. Sr. No. Point of doubt Clarification 7 What about the cost of after sales service charges and pre-delivery inspection (PDI and free after sales services) charges, incurred by the dealer during the warranty period Since these services are provided free by the dealer on behalf of the assessee, the cost towards this is included in the dealer s margin (or reimbursed to him). This is one of the considerations for sale of the goods....
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.... of term transaction value gives more clarity and all doubts as to how the assessable value is to be arrived at are removed. It is also noted that the various items incorporated in the term transaction value as defined in Section 4(3)(d) of said Act as forming part of value of Excisable goods are in fact the expenses/deductions specifically disallowed by the Supreme Court in Bombay Tyre International Ltd. reported in 1983 (14) E.L.T. 1896 (S.C.). If one closely observes the definition of the term transaction value, it uses the terminology servicing . It appears that the respondents are taking the benefit of this term servicing for the purpose of adding to the assessable value, the expenses incurred by the dealer towards PDI and free said services by resorting to Clause 7 of Circular dated 1st July, 2002 and Circular dated 12th December, 2002. 43. Turning to point in question, it is noticed that the definition of the transaction value in Section 4(3)(d) of the said Act is extensive and ropes in the price of the goods and other amounts charged by the assessee by the reason of sale or in connection with sale. A close reading of Section 4(3)(d) of the said Act would indicate t....
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....e petitioners and the dealer are not related to each other. Having complied with these requirements set out in Section 4(1)(a) of the said Act, the assessable value of the cars will have to be treated as the one which will be the transaction value. The transaction value will have to be arrived at by taking into consideration the definition of the term transaction value appearing in Section 4(3)(d) of the said Act. The record clearly goes to show that apart from the price which is paid by the dealer to the petitioners, no amount is recovered by the petitioners from the dealer or the customer. As such, the stand of the respondents that the expenses incurred towards PDI as well as said services have to be included in the assessable value cannot be accepted. This is being observed on the ground that there is no material to show that the expenses for the pre-delivery inspection as well as after sales services are paid by the dealer to the petitioners. The dealer renders PDI and said services as a routine and legitimate activity as a dealer. It is also clear from the record and on the basis of the typical dealership agreement entered into with the dealer by the petitioners that a dealer ....
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....rovisions of the said Rules will not be applicable to the facts of this case as the transaction between the petitioners and the dealer does not fall within the ambit of Section 4(1)(b) of the said Act. The transaction of sale of a car between the petitioners and the dealer is governed by the provisions of Section 4(1)(a) of said Act as the petitioners as assessee and the dealer as a buyer of the car are not related to each other and price is the sole consideration for the sale. In our view, reference to the Rule 6 of the Valuation Rules in Clause 7 of Circular dated 1st July, 2002 is totally misconceived. The reference made by learned Senior Counsel Mr. Sridharan to the case of Mr. A.K. Roy and Anr. v. Voltas Ltd. reported in 1977 (1) E.L.T. (J177) (S.C.) is apt. We have perused the said judgment and applying the said judgment to the facts of the present case, the respondents would be able to demand Excise duty on the amount which is charged by the petitioners to the dealer. It is to be noted that as per the record, once the car is sold by the petitioners to the dealer for a particular consideration, no other amount is payable by the dealer to the petitioners. It is required to be ....
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.... in the year 2000, pursuant to Section 94 of the Finance Act, 2000, the respondents issued Circular No. F.B-10/1/2000-TRU, dated 12th May, 2000 as also Circular letter F. No. 354/81/2000/TRU dated 30th June, 2000. A reading of these two Circulars would clearly go to show that the respondents wanted to clarify the term transaction value and these two Circulars were to be used as guidelines while arriving at the assessable value. Considering these Circulars, we are inclined to accept the submission advanced by learned Senior Counsel Mr. Sridharan that the expenses incurred towards PDI and said services cannot be included in the assessable value. It is peculiar to note that after issuing Circular dated 1st July, 2002, the respondents issued Circular dated 12th December, 2002 and in the said Circular, the respondents clearly admitted that the expenses incurred towards Pre-Delivery Inspection and free after sales services provided by the dealer to a vehicle during the warranty period will not be included in the assessable value. Paragraph 4 of the Circular dated 12th December, 2002 reads as under. In view of the above facts Board withdraws the Circular No. 355/71/97 CX., ....
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....9. For all the aforesaid reasons, we hold that as per Section 4(3)(d) of the Central Excise Act, 1944 the PDI and free after sales services charges can be included in the transaction value only when they are charged by the assessee to the buyer. The impugned circulars, inter alia, purport to hold that where the assessee sells the motor vehicles to a dealer (buyer) at a given price and the dealer in turn sells the said motor vehicles to a customer at a price with dealers margin which includes the PDI charges and after sales service charges, then, the assessable value for determining the Central Excise duty payable by the assessee has to be determined by including the PDI and after sales service charges even if they are not been charged by the assessee to the dealer, which in our opinion is contrary to the provisions of Section 4(3)(d) of the Central Excise Act, 1944 and, hence, liable to be quashed and set aside. Whether the adjudicating authority in the present case is justified in including the PDI and after sales service charges is a question to be decided in the appeal, if any, filed against the order-in-original." The ratio of the above decision is squarely applicable to the....
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....mmission on CSD (2) Non-inclusion of profit margin at HMP (3) Cost of Display Kits and (4) Incentive Trips recovered from the dealers. We find that the adjudicating authority included these charges in determining the transaction value whereas the LAA set aside the order and allowed the assessee s appeals. We have examined the revenue's contentions and perused various impugned orders of LAA from 2003 to 2008 and noticed that the LAA has dealt the issue in detail and relied Tribunal's decisions. 26.1 As regards the inclusion of overriding commission paid to dealers on the sale of cars to Defence personnel through Canteen Stores Department (CSD), we find the cars were directly sold by the assessee to the CSD and not through the dealers. LAA clearly brought out that the amount which was paid to dealers is nothing but towards payment for providing after sales services of the cars sold to the Defence personnel directly. Revenue s plea is that it is a commission paid to be included as per Section 4 is not justified. Accordingly, the LAA order on this account is liable to be upheld. 26.2 As regards non-inclusion of Display Kits and Recovery of Incentive Trips from the deal....
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....- 2007 (207) ELT 94 (Tri.-Del.) held the issue in favour of the assessee. The Hon'ble Supreme Court has dismissed the civil appeal filed by Revenue on merits as reported in Commissioner Vs Mahavir Spinning Mills Ltd. 2007 (212) ELT A152 (SC). In view of the aforesaid decision, we hold that profit margin paid at the HMP is not includible in the assessable value of cars and LAA order on this account is liable to be upheld. 27. Issue on Demo Cars: On this issue, both assessee and Revenue are on appeals before this Tribunal for different periods. Initially, the LAA in his OIA No.41/2004 dt. 28.7.2004 had upheld DC's order dt. 12.12.2003 on rejection of transaction value and redetermination of value on demo cars which led to assessee s appeal. But the LAA in his subsequent OIAs for the period 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 had set aside the DC's order on identical issue of demo cars for which Revenue is before this Tribunal. There is no dispute on the fact that assessee sell cars through their dealer network and adopt two different price viz. for normal cars and for demo cars by way of giving special discounts. Adjudicating authority discussed t....
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....proper. Since the demo cars are meant for display and publicity, a special discount was given for demo cars which is not the case in the case of normal car. Since the demo car is not at normal sale, but with a condition that it should be used for demonstration purpose/test drive, the price charged for the sale of demo cars is not a normal transaction at the time of place of removal. There was no evidence placed by assessee that the entire sale of Demo cars was sold at higher price whereas we find that the lower authority has gone by few examples of the price of the demo car which is higher than the normal car and the same cannot be taken for entire transaction. As rightly clarified by the Board in their circular No.6/40/2002-CX dt. 1.4.2003, at the time of clearance from the factory gate, there is no difference between the normal car and demo car. The same car is sold to the dealer as Demo car for carrying out test drive by the customers which was subsequently sold to ultimate customer on 'as is where is basis'. Therefore, the adjudicating authority has rightly disallowed the discount on the sale of demo car and redetermined the price as per normal car and demanded the diff....