By TIOL News Service

CHENNAI, MAR 07, 2016: THE batch of appeals involve the issue of valuation of passenger cars cleared by the assessee through their dealers as well as through their depots located across the country. The assessee opted for provisional assessment since they were not able to determine the actual price on various cost details and other charges, discounts were yet to be finalized. The assessments were finalized and both the assessee and the revenue are in appeal against the final assessment on the following issues:

1. Non-inclusion of cost of Pre-Delivery Inspection (PDI) and After Sales Service (ASS) in the assessable value and consequent short payment of duty.

2. Non-inclusion of overriding commission paid to dealers on sale to canteen store-department (CSD)

3. Demo Cars

4. Cost of display kits collected from dealer through debit note.

5. Recovery of incentive trip cost from dealers.

6. Non-inclusion of profit margin at Hyundai Motor Plaza.

After hearing both sides, the Tribunal decided the appeals as under:

++ PDI/ASS charges: Subsequent to the Tribunal's LB decision in the Maruti Suzuki case, the High Court of Mumbai in the case of Tata Motors Ltd. held PDI charges not includible and quashed the Board's circulars dt. 1.7.2012 and 12.12.2002.The Bombay High Court has discussed the issue of PDI charges and ASS charges at length within the scope of Section 4 and also taken into consideration the LB decision of Maruti Suzuki India; and held that Board's circular referred to above are not inconformity with provisions of Section 4 of Central Excise Act. The ratio of the Bombay HC ruling is squarely applicable to the present case.

++ (1) Overriding Commission on CSD (2) Non-inclusion of profit margin at HMP (3) Cost of Display Kits and (4) Incentive Trips recovered from the dealers: Regarding overriding commission paid to dealers on the sale of cars to Defence personnel through Canteen Stores Department (CSD), the cars were directly sold by the assessee to the CSD and not through the dealers. Lower Appellate Authority clearly brought out that the amount which was paid to dealers is towards providing after sales services of the cars sold to the Defence personnel directly. Revenue's plea that it is a commission paid to be included as per Section 4, is not justified. Regarding non-inclusion of Display Kits and Recovery of Incentive Trips from the dealers, both the transactions are related to post-sale transactions. Any recovery from the dealer on account of cost of display kits or recovery of expenses for the incentive trips does not form part of the assessable value.

++ Regarding non-inclusion of Profit Margin to Hyundai Motors Plaza (HMP), Revenue's main contention is that assessee had sold the cars through their depots situated at Chennai, Mumbai and Delhi. These are retail show rooms where the cars are sold directly to the customers on retail sale. The department had initially alleged that as per amendment of definition of "place of removal", the depot becomes place of removal for delivery and sale and the price at which the goods are sold at the depot should be taken as the price. These plazas are not depot and there is no sale to whole sale dealers; hence there is no wholesale transaction to dealers and the term "place of removal" is applicable only in a case where the goods are sold in a wholesale transaction.

++ Demo Cars: No dispute on the fact that assessee sells cars through their dealer network and adopt two different price viz. for normal cars and for demo cars by way of giving special discounts. The issue of valuation on Demo Cars stands settled in the case of Ford India Ltd. Vs CCE Chennai wherein the Division Bench had consistently upheld the demand of differential duty on Demo Cars and rejected the assessee's appeals except waiving the penalties. The ratio of the Tribunal rulings in the Royal Enfield and Ford India cases squarely apply to the present case as the issues are identical. As rightly clarified by the Board circular dated 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, redetermined the price as per normal car and demanded the differential duty.

(See 2016-TIOL-548-CESTAT-MAD)