TaxTMI 
TaxTMI 
2008 (4) TMI 258
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....the ground that while during this period, as per the appellant's agreement with their dealers, the dealers were providing free after sale service to the customers for which the dealers were being reimbursed by the appellant @ Rs. 70/- per service, this amount was not being added to the assessable value, resulting in short payment of duty. According to department, the assessee failed to substantiate their claim regarding inclusion of after sale service charges in the assessable value and since they deliberately suppressed the information regarding the after sale service charges paid to the dealers, longer limitation period 5 years under proviso Section 11A(1) of the Act has been invoked for recovery of allegedly short paid duty and for the same reason, penalty under Section 11AC has been imposed. 2. Heard both the sides. 2.1. Shri R. Krishnan, Advocate, the learned counsel appearing on behalf of the appellant, assailed the Commissioner's order both on merit as well as on limitation and the submissions made by him are, in brief, as under :- (i) As per the appellant's agreement with their dealers, the dealers were to provide certain number of free after sale service to the custo....
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.... after sale service being provided by the dealers on behalf of the manufacturers, the cost of such after sale service is not includible in the assessable value so long as the transactions between the manufacturer and the dealers are on principal to principal basis. These judgments are applicable to this can also, even though this case pertain to period w.e.f. 01/7/2000. (v) Judgment of the CESTAT in the case of Maruti Udyog Limited vs. CCE, Delhi-III reported in 2004 (170) E.L.T. 245 (Tri.) was also cited whereas in respect of a similar dispute for the period w.e.f. 01/7/2000, it was held that pre-delivery inspection and after sales service charges, received by the dealers, not being payable to manufacturer or payable on behalf of the manufacturer, are not includible in the assessable value of the case. This judgment has been upheld by the Hon'ble Supreme Court vide judgment reported in 2006 (201) E.L.T. A 28 (SC). (vi) The learned Commissioner does not dispute that the agreement with the dealers was in vogue for the period prior to 01/07/2000 when the new Section 4 was instituted. The appellants having continued with the dealership agreements with the same dealers in the same f....
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.... sale service is already included in the assessable value, the appellant have failed to adduce any evidence that such expenses are already included in the assessable value. (iv) Extended limitation period has been correctly invoked as the appellant failed to divulge the requisite details which were their personal knowledge and which were necessary in order to proceed further in this issue. 3. We have considered the rival submissions. The short point to be decided in this case is as to whether during the period of dispute, the amount reimbursed by the appellant to their dealers for providing free after sale service to the customers, is includible in the assessable value of the goods cleared by the appellant to their dealers and on which the duty liability had been discharged by the appellants. 4. As per the appellant's agreement with their dealers, the dealers are required to provide certain number of free after sale services to the customers for which the dealers are reimbursed by the appellant. There is no dispute about this. Thus, the expenses of after sale service being provided by the dealers free of charge to the customers are borne by the appellant, the manufacturers. As....
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....at as per the appellant's agreements with the dealers, the dealers are legally bound to provide free after sale service to the customers on behalf of the appellants for which they are not reimbursed. Since, the dealers are being reimbursed by the appellant for the free after sale service being provided by them to the ultimate customers, the same cannot be said to be an additional consideration. The sale consideration is what flows from the buyer to the seller and not what the seller gives to the buyer. Since, the appellant are bearing the cost of free after sale service, there is no question of adding the same to the assessable value, even if the sale price is below the cost, as it is a settled law, as held by the Hon'ble Supreme Court in the case of Collector of Central Excise, Shillong vs. North East Gases (P) Ltd. (Supra) that it is the actual sale price, even if below the cost of production, which has to be adopted as the assessable value so long as there is no allegation of flow back or additional consideration. In this case, there is no flow back from the dealers to the appellant. 5.1 In case of Commissioner of Central Excise, Mumbai vs. Mahindra and Mahindra reported 1999 ....
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....value of goods marketed and total value split up into various elements like special packing charges, warranty charges, service charges etc. These cases would require to be scrutinized carefully to ensure that duty is paid on correct value. Such elements have been held to be includible in the assessable value under erstwhile Section 4 by various court pronouncements, notably, the Supreme Court's judgment in MRF case. Now the definition of 'transaction value' makes it clear that all the elements of cost which the assessee incurred till the sale/marketing as aforesaid, continue to be included in the assessable value even under new Section 4." According to the learned Counsel what was required to be included in the assessable value under the new Section is the value, including the cost incurred in relation to the manufacture and marketing by the manufacturer, and not the cost incurred or remuneration received by the dealer. The learned Counsel pointed out that the later clarification issued under Circular No. 643/34/2002-CX dated 1-7-2002 and followed by the Commissioner in the impugned order is not in conformity with Section 4 and the definition of transaction value contained therein....