Inclusion of After Sale Service and Pre-delivery Inspection Charges in assessable value - Board wants cases sent to call Book
CBEC had in circular No. 643/34/2002-CX dated 1-7-2002 clarified as follows:
What about the cost of after sales service charges and pre delivery inspection (PDI) charges, incurred by the dealer during the warranty period?
Since these services are 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 Valuation Rules on the same grounds as indicated in respect of Advertisement and Publicity charges. That is, in such cases the after sales service charges and PDI charges will be included in the assessable value.
BUT the Tribunal in Maruti Udyog - held that these charges are not includible in the assessable value as these do not accrue to the manufacturer.
But Tribunal in Maruti Suzuki case - , doubted the correctness of its earlier decision referred to above, and referred the following question for consideration by a Larger Bench.
“Whether the charges towards pre-delivery inspection and after-sale-services received by dealers from buyers of the cars are to be included in the assessable value of cars in the light of the definition of ‘transaction value' given in Section 4(3)(d) of the Central Excise Act.”
The Supreme Court has in the case of Grasim Industries - , referred the question as to whether the concept of transaction value under new Section 4 has made any material departure from deemed normal price concept of erstwhile Section 4(1)(a) of the Act for consideration of the Larger Bench.
This issue was discussed in the recent Chief Commissioners conference at Shillong on 30 th and 31 st October 2009. The conference suggested that show cause notices should be issued demanding duty on the value of these activities, and transferred to Call Book pending the decision of Larger Bench on the issue.
The Board has accepted the Conference recommendation and has direc ted the officers to issue Show Cause Notices and transfer them to Call Book pending decision of larger bench on the issue.
CBEC CIRCULAR NO. 909/29/09-CX, Dated : December 11, 2009