CE Valuation - Maruti directed to pay Rs. 150 Crores pre-deposit - Another Fiat in making?
THE Commissioner of Central Excise demanded a duty of Rs. 241 crore from Maruti Suzuki by adding to the assessable value the dealers' contribution in the consumer promotional schemes paid from the dealer's margin.
Legal Corner Icon — the image was hosted by the publisher and was not captured.Maruti offers several promotional and incentive schemes such as corporate discount, free insurance etc. for their customers through the dealers.
The Commissioner held that the discounts borne by the dealers was a flow of consideration to the appellants by reason of or in connection with the sale of vehicles and accordingly the amount of discount borne by the dealer was includible in the assessable value for the purpose of payment of central excise duty in terms of the definition of 'transaction value' as provided under Section 4 of Central Excise Act, 1944.
On appeal, the Tribunal noted that prima facie, the promotional discount was given under the understanding between the manufacturer and the dealer in relation to the activity of sale as an expenditure on behalf of the appellant by the dealer , and that is regulated through dealer's margin. That would form part of the assessable value of such goods. Undoubtedly, such discounts borne by the dealers could also be to the advantage of the dealers in the form of increased sale leading to earning of increased profit Commission. However, in relation to the manufacturer, it would be an indirect consideration received by the assessee in relation to the clearance of the product manufactured by him .
The Tribunal did not accept the plea of Maruti that the dealers bear the discount on their own accord, as no one will sacrifice his margin unless otherwise compensated.It would be commercially unthinkable for any dealer to remain in business without offering promotional discounts on 'Ex-showroom Price', while charging over and above that price in the name of 'Handling Charges' or by some other name. Therefore, prima facie it transpires that the discounts have been offered in connection with the sale and such discounts were a booster to the appellant to increase the sales. Further, such discounts has character of expenses on account of Advertising or Publicity, Marketing and Selling Organization Expenses, which are covered within the definition of 'transaction value' as provided under Section 4(3)(d) of CEA, 1944.
Tribunal found that the adjudication has force and pre-deposit is required to protect the interest of Revenue. And so the Tribunal ordered a pre-deposit of Rs. 150 Crores.
After decades of existence of Central Excise Duty, it is strange that even now we have disputes on valuation!
We bring you today the Order of the Tribunal delivered a week ago. Please see Breaking News