TaxTMI 
TaxTMI 
2024 (3) TMI 635
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.... of excise duty. The appellant sells their final product through a network of dealers appointed by them through dealership agreement, which is placed on record. The dealers purchase the vehicles from the appellant at an ex-factory price and sell them to the ultimate customer after including dealer's margin at price not exceeding maximum price. All final products sold by the appellant are subject to manufacturers' warranty for any manufacturing defects. It is further alleged that in order to avail the warranty claim, customers are required to fulfill certain pre-conditions as mentioned in the customer/owner's manual, for e.g. the customers are required to mandatorily avail 6 free services and 9 paid services to make a valid claim for warranty; the vehicle is to be maintained in a good condition etc. As per the dealership agreement, the dealers are responsible for providing free service to the customers from time to time and the expenses incurred in respect of such free services are reimbursed by the appellant on the basis of claims made by the dealers. Further, once the goods are sold to the dealers, the dealers are also required to conduct a pre-delivery inspection of t....
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....refore, it cannot be added back to the sale price charged by the manufacturer from the dealer for computing the assessable value. She further submits that the price paid by the dealers to the appellant is the sole consideration for computation of assessable value in terms of Section 4(3) of the Act and no additional consideration is given to the appellant. 4.5 She further submits that the PDI and free ASS provided by the dealers are as per the obligations provided under the dealership agreement, which is placed on record. Further, the appellant reimburses the amount of expenses incurred by the dealers for ASS and the cost of such free ASS, which is reimbursed, is in fact borne by the appellant and already included in the assessable value of the goods and the same cannot be liable to be included in the assessable value again. In support of her submission, she relies on the following case-laws: a) General Motors India Private Limited vs. Commissioner of Central Excise, Pune-I - 2022 (4) TMI 1539 CESTAT MUMBAI b) Skoda Auto Volkswagen India Private Limited vs. Commissioner of Central Excise, Aurangabad - 2021 (12) TMI 239 CESTAT MUMBAI c) Tata Motors Ltd vs. Commissioner of CE ....
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....entions at Para 2 that: "During the course of audit of the Noticee's records by the Internal Audit Team of the Commissionerate from 19th to 22nd January 2011, it was noticed that the Noticee was not including the "After Sales expenses reimbursed to the dealers" in the assessable value. It is a well-known fact in case of motor vehicles manufacturers that After Sales service and pre-delivery inspection (PDI) are services 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 (motor vehicles, consumer items etc.) to the dealer and will therefore be governed by Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (hereinafter referred to as the Valuation Rules 2000). That is, in such cases the after-sales service charges and PDI charges will be included in the assessable value." 9. Further, we find that the Department called for after sale expenses reimbursed to the dealers for the period 2006-07 to 2010- 11 which were submitted by the appellants; the total duty short paid, allegedly on account of non-inc....
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....ers, from ultimate customers or that the additional amounts charged by the dealers from ultimate customers is actually flowing back to the appellants. Only under these two conditions the said expenses can be held includable in the assessable value even under the old or amended definition of Section 4 of CEA, 1944. We find that Adjudicating Authority also finds at Para 17.3 of the impugned order as follows: "I find that from the perusal of Rule 6 ibid and Clause (a) of sub section (1) of section 4 of the CEA 1944 it becomes clear that the After Sales expenses reimbursed to the dealers by the Noticee were includible in the assessable value and by not doing so the Noticee had short paid excise duty on under-valued finished goods which were manufactured and cleared by them. In their reply to the SCN's has inter-alia, submitted that the said PDI and after sale charge are included in the Dealer's margin and that the Dealer margin cannot be added to the Transaction value. I find that the said PDI and three free services and necessary on the part of a customer to remain eligible for any claim under warranty. It is obligatory on the part of dealer to provide three free services as mention....
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....bove the listed price sanctioned by the appellants is towards the amount reimbursable by the appellants to the dealers. It is also not established that the amount extra collected is towards the PDI and ASS. There is no evidence to prove that the amount charged extra by the dealers is flowing back towards the appellant. In view of this, we find that the impugned order as well as the arguments of the learned Authorized Representative and to some extent, argument of the Counsel also is beyond the scope of the show-cause notice. No case is made for the inclusion of "after sale expenses reimbursed to the dealers by the Noticee" except for a bland averment in Para 2 of the show-cause notice that it is a well-known fact in case of motor vehicles manufacturers that After Sales service and pre-delivery inspection (PDI) are services 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).It is not evidenced that the appellants instead of paying the dealers have allowed or authorized them to recover the amounts, towards the expenses incurred for the PDI and ASS, from the ultimate customers. It has been held in a nu....