TaxTMI 
TaxTMI 
2004 (4) TMI 159
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....e that the pre-delivery inspection and after-sales service for Vehicles are carried out fully and efficiently in accordance with the requirements and policies of the Company established from time to time. In particular the Dealer shall at all times make complete and accurate reports in the form and at the times required by the Company in respect of all work carried out by it in pursuance of the Company's Service requirements and policies. The Dealer shall also maintain a Service history of each vehicle serviced by it in a form required by the Company". 2. The dispute for consideration in the present appeal is whether the cost of the above Post-Delivery Inspection (PDI) and sale service are to form part of the assessable value of the automobiles while discharging Central Excise duty. Impugned order has held that these charges should form part of the assessable value. We read the finding :- "The facts conveyed by the department in show cause notices, are that each vehicle, sold by M/s. MUL, carried a warranty for a given period, and that to remain eligible for that warranty, the buyer of each vehicle had to pay Rs. 850/- on account of 'Pre-Delivery Inspection and ....
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.... stores, outward handling, serving warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. After a careful examination of the definition of the 'transaction value' adduced above, I discover that in addition to the amount charged as price, the definition also covers the amount, which is liable to be paid by the buyer to the assessees, or to any other person on behalf of the assessee, even after the sale, if that amount has a connection with the sale; and that the definition specifically mentions that the amount charged, inter alia, in connection with 'warranty' has a connection with sale. This, otherwise, needs no proof that warranty promotes and enhances marketability of a product, and in this case, it is a amount of PDI to remain eligible for that warranty. The amount, thus, has a direct nexus with warranty and therefore, would fall within the ambit of definition of transaction value even if realized by the dealer on behalf of M/s. MUL. The facts and evidence further show that the warranty is extended by M/s. MUL and the amount of PDI is....
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....ay whether to the manufacturer or on his behalf in connection with the sale of the goods. It is, therefore, contended that the distinction made in the impugned order between the replaced Section 4 and new Section 4 is contrary to the words of the new section themselves. The appellants have emphasized (noted in the impugned order) that the PDI and service charges remain included in the commission of the dealer and that commission payable to him by the buyer, is not payable to the manufacturer and therefore the collection of commission and rendering of services are entirely outside the scope of the sale of the automobiles by the manufacturer to the dealers. 5. During the hearing of the case, learned Counsel for the appellants also pointed out that the scope of the new section had been correctly understood and interpreted by the Board on the eve of bringing into force of the new section through circular dated 30-6-2000. Para 13 of this circular stated as under with regard to warranty charges and service charges :- "13. It is felt that where the assessee includes all their costs incurred in relation to manufacture and marketing while fixing price payable for the goods and b....
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....ted enhanced scope of Section 4 and Valuation Rules (Rule 6 as referred to in the clarification dated 1-7-2002) introduced w.e.f. 1-7-2002. The reliance placed is on the definition of transaction value contained in Section 4(3)(d). The relevant words of that sub-section are "and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to or on behalf of the assessee, by reasons of or in connection with the sale......... including, any amount charged for or to make provision for............servicing warranty". The reference is to "amount liable to be paid to the assessee or on behalf of the assessee". The words in the definition do not relate to amounts payable to or on behalf of any party other than the manufacturer assessee. In the present case, no amount is payable to or on behalf of MUL towards the two costs, namely PDI and free after sale service. Therefore, the demand is clearly outside the terms of the Section. The circular dated 1-7-2002 draws upon Rule 6 of the Valuation Rules to support the clarification. We may read that rule to see whether the clarification flows from the words of that Rule either. "Rule 6. Where the excisa....