Central Excise Valuation – Landmark Judgement by CESTAT LB
MARUTI sells its cars through dealers. The dealers collect pre-delivery inspection and after-sale-service charges from the buyers. Are these to be included in the assessable value? Yes, says the Larger Bench of the Tribunal headed by the President. Don't the dealers make a profit on these services and are the profits also excisable? Dealers offer several discounts to the customer and sometimes these charges are waived and then how is the transaction value determined?
The whole concept of transaction value will have a new look.
The Larger Bench observed,
++ Any amount collected by the dealer towards pre-delivery inspection or after sale services from the buyer of the goods under the understanding between the manufacturer and the dealer or forming part of the activity of sale promotion of the goods would be a payment on behalf of the assessee to the dealer by the buyer, and hence, it would form part of the assessable value of such goods.
++ The term "sale" used in the definition clause should not be misunderstood as having used, otherwise than to identify the stage at which the product is cleared to the customer i.e. the buyer thereof and the price element which is to be considered for the purpose of deciding the issue relating to the assessable value of the manufactured goods. It essentially denotes the total consideration payable by the buyer for the product which is to be considered while calculating the assessable value of the goods for the purpose of determining the duty liability under the said Act. It is totally different from the liability relating to sale tax. This is apparent from the scheme of the Act as well as the intent and spirit of the Section 4 itself.
++ In the scheme of the said Act, therefore, the concept of transaction value relates to the manufacturing cost inclusive of any other amount received or receivable directly or indirectly to make the product marketable. The manufacturing of a product and the marketability thereof are inbuilt elements of the scheme of assessable value under Section 4 of the said Act.
We will bring you this landmark judgement tomorrow.