TaxTMI 
TaxTMI 
2026 (5) TMI 1227
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.... 87 of Central Excise Tariff At, 1985. For the period prior to 01.04.2009, the respondent were manufacturing and clearing motor vehicles from the manufacturing division to a separate division which provided post-sales service required in respect of the vehicles manufactured and cleared by them. The manufactured components of the vehicle were covered under a warranty period of one year and the driveline components of the same vehicles were covered with an additional warranty for an additional period of one year or until the vehicles crossed 2 lacs kms whichever is earlier. To claim the benefit under the above warranty, the vehicles must be carried out with a warranty service within four weeks of purchase or after the vehicle crossed 10,000 kms whichever is earlier. The respondents had provided mandatory warranty service free of cost to their customers. In addition to the warranty service, the respondent provided 'Volvo's Preventive Maintenance Programme" (VPMP, for short) which are provided under a separate service agreement entered with customers by the respondents which is generally entered for a period of 36 months. For the maintenance of the vehicles under the said VPMP, a separ....
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....he driveline components of the said vehicles were further covered with an additional warranty for an additional period of 12 months or until the vehicle crossed 2,00,000 kms. whichever occurs first. It is contended that for the purpose of claiming any benefit under the above warranty, the vehicles have to be carried out with warranty service within 4 weeks or after a maximum of 10,000 kms. whichever was earlier. Such warranty service was carried out by the respondent free of cost to the purchasers. In addition to the warranty service, the vehicles were also required to be maintained in accordance with VPMP to remain eligible to claim any benefit under the above warranty. The said further warranty services under VPMP for a period of 36 months and the buyers were charged separately a monthly fee for the said services. It is argued that even though, it was purported that the services covered under the VPMP were additional and the buyers were required to enter into a separate agreement for the said purpose effectively the VPMP is compulsory for making a warranty claim. Thus, the transaction involving such service agreement and payment therefor was in connection with the sale or by reas....
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....nstitution of India. 3.3. In their additional submission pursuant to the hearing held on 19.01.2026, it is submitted that the warranty card the Bench sought to read to ascertain the conditions therein, is not available. However, it is submitted that the warranty services is inextricably linked to the acceptance of preventive maintenance programme undertaken by the Volvo upto 01.04.2009 and VECVL thereafter. Further, referring to the show-cause notice dated 29.07.2008, it is submitted that there is a specific allegation in this regard and not disputed at any point of time by the respondent. 4.1. Per contra, on the other hand, supporting the impugned order passed by the adjudicating authority, the learned advocate has submitted that the learned Commissioner has primarily based the finding on the issue involved in the judgment of the Tribunal in the appellant's own case reported as Volvo India Ltd. Vs. CCE, Bangalore [2005(182) ELT 471 (Tri. Del.) and CCE&ST, LTU Vs. Volvo India Ltd. [2015(38) STR 692 (Tri. Bang.)]. He has submitted that though the Tribunal's decision has attained finality as the Hon'ble Supreme Court has dismissed the appeals, the Department filed the present a....
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.... submitted that during the period post 01.04.2009, they were clearing the vehicles to VECVL in furtherance of the Distributor Agreement dated 26.05.2008 and VECVL was thereafter entering into preventive maintenance contracts with customers for providing preventive maintenance service. VECVL was receiving service charges and the said charges were completely retained by VECVL. He has submitted that in order to apply Rule 6 of CEVR, 2000, first, the conditions of Section 4(1)(b) of CEA, 1944 requires to be fulfilled. He has submitted that the price at which the vehicles are sold by the respondents to VECVL is the sole consideration and there is no other consideration flowing from VECVL to the respondents pertaining to the sale of vehicles. Thus, Section 4(1)(b) cannot be made applicable and consequentially Rule 6 of the CEVR, 2000 is not attracted. He has submitted that Rule 6 of the CEVR, 2000 is attracted for including additional consideration in the assessable value provided the additional consideration flows directly or indirectly from the buyer to the assessee. The service charges collected by VECVL towards providing of preventive maintenance service do not qualify as additional ....
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....pay the duty of excise under this Act and includes his agent; (b) persons shall be deemed to be "related" if - (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of each other. Explanation. - In this clause - (i) "inter-connected undertakings"" shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969); and (ii) "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956); (c) "place of removal" means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, premises of a consignment agent or any other place or premises from ....
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....e of material consumed, including packaging materials, in the production of such goods; (iv) value of engineering, development, art work, design work and plans and sketches undertaken else-where than in the factory of production and necessary for the production of such goods. Explanation 2. - Where an assessee receives any advance payment from the buyer against delivery of any excisable goods, no notional interest on such advance shall be added to the value unless the Central Excise Officer has evidence to the effect that the advance received has influenced the fixation of the price of the goods by way of charging a lesser price from or by offering a special discount to the buyer who has made the advance deposit. Illustration 1.-X, an assessee, sells his goods to Y against full advance payment at Rs. 100 per piece. How-ever, X also sells such goods to Z without any advance payment at the same price of Rs. 100 per piece. No notional interest on the advance received by X is includible in the transaction value. Illustration 2. A, an assessee, manufactures and supplies certain goods as per design and specification furnished by B at a price of Rs. 10 ....
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....or in connection with the sale, whether payable at the time of the sale or at any other time, including but not limited to any amount charged for or to make provision for advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter....(emphasis added by me). In this regard, as has been noted earlier I find that the Hon'ble jurisdictional Tribunal had, vide Final Order No.11/2005 dated 04.01.2005 (reported in 2005 (182) E.L.T 471], held that in terms of section 4(3)(d) of the Act,'44 transaction value included any amount which the buyer was liable to pay by reason of or in connection with the sale, whether payable at the time of sale or any other time; that such value would include charges payable by the buyer to the seller for providing, inter-alia, 'servicing' of the goods and that the sole question for consideration in the case was to decide whether the services provided under 'service agreements' fell, by reason of or in connection with the sale of vehicles, under the term 'servicing' referred to in the afore-said section 4(3)(1)(d) of the Act,'94. Accordi....
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....n'ble Tribunal that as per the terms and conditions of the agreement between dealers and the noticee, preventive maintenance service was an arrangement separate from the manufacture and sale of motor vehicles though for legitimate business considerations, both the parties might have entered into such agreements while the services were not integral to the sale of motor vehicles. It has further been noted by the Tribunal that entering in to service agreement and payment thereof were not pre-conditions for the sale of vehicles and they were optional to the buyers, as a result of which it could not be held that the transactions had a proximate connection the sale and further that even though for legitimate business considerations, the service agreement might be entered into between the manufacturer and buyers, there was no conditionality to the sale transacted and that the condition of proper maintenance of vehicles to be eligible for warranty was also not a ground to hold that there was proximity between sale and servicing. 24. I find that the facts relevant and the law relating to the determination of dutiability of the preventive maintenance fees amounts charged as addi....
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....utor were so associated with each other that there was mutuality of interest directly or indirectly in the business of each other. There is no evidence on record except for the general presumption as to the existence of such mutuality since VECVL was the sole distributor of the vehicles manufactured by the noticee and since they were also admittedly inter-connected undertakings'. The notices have alleged that the notice and VECVL were related persons on the grounds of the afore-said mutuality and also since they were inter-connected undertakings'. The demands for differential duties have been proposed by way of applying Rule 6 of the Valuation Rules, 2000 whereunder the amount of service charges collected for preventive maintenance was treated to be additional consideration. It is my considered view that in the facts of the case since the seller and buyer of vehicles were related persons, value was required to be determined foremost, in terms of Rule 9 or 10 of the Valuation Rules, 2000. This is so, because in terms of Section 4(1)(b) of the Act, 1944 where goods are sold in circumstances such that the buyer and seller are related to each other (which had been defined under....
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....the Vehicles sold in such circumstances cannot be resorted to applying Rule 6 of the CEVR, 2000 for the service charges collected towards preventive maintenance considering the same as additional consideration. The learned Commissioner further held that in such circumstances, where the seller and buyer are related to each other, the assessable value of the goods be determined either under Rule 9 or Rule 10 of the CEVR, 2000 and not under Rule 6 of the CEVR, 2000 considering the amounts of service charges collected by the related person as an additional consideration attracting Rule 6 of the said Rules. We do not find any discrepancy in the said observation of the learned Commissioner inasmuch as in the event the transactions between the respondent and its sole distributors are found to be related person transaction then Rule 6 CEVR, 2000 cannot be made applicable to add the charges collected towards the optional preventive maintenance scheme offered. In other words, loading the transaction value with additional consideration i.e the charges collected towards the said scheme by VECVL, instead of computing the value taking into consideration the price at which the goods are sold by t....