SC overruled the CESTAT Larger Bench decision in Maruti Suzuki case and held that pre-delivery inspection charges and after sales service charges are not to be included in assessable value
Commissioner of Central Excise, Mysore Vs. TVS Motors Company Ltd. [2015 (12) TMI 874 – SUPREME COURT]
TVS Motors Company Ltd. (“the Respondent”) was holding Central Excise Registration for the manufacturing and clearing two wheeled motor vehicles. The Respondent sells their goods directly to the customers through sales depots spread throughout the country. The Respondent had requested for provisional assessment to the Department with respect to the depot sales as they could not determine the normal transaction value at the time of clearance at factory gate in respect of such depot clearance. After finalizing the provisional assessment, the Department has passed the Order for inclusion of Pre Delivery Inspection (“PDI”) charges and Free After Sales service (“ASS”) charges in the assessable value on the ground of Circular No. 643/34/2002 dated July 1, 2002 wherein it has been clarified that the same has to be included in the assessable value.
The Hon’ble Supreme Court relying upon the with the view of the Hon’ble Bombay High Court in the case of Tata Motors Ltd. Vs. Union of India [2012-TIOL-721-HC-MUM-CX], held that where the expenses incurred towards PDI and other services are solely borne by the dealer and the manufacturer have nothing to do with the said expenses, then adding those expenses in the assessable value would be contrary to the provisions of Section 4(1)(a) read with Section 4(3)(d) of the Excise Act. Therefore, the amount incurred towards PDI and other services cannot fall within the definition of the transaction value.
Thus, the Hon’ble Apex Court held that PDI charges and free ASS charges would not be included in the assessable value under Section 4 of the Excise Act for the purposes of paying Excise duty. It was further held that the CESTAT Larger Bench view in the case of Maruti Suzuki India Ltd. Vs. Commissioner of Central Excise, Delhi-III [2010 (8) TMI 49-CESTAT NEW DELHI] does not lay down the law correctly and was, therefore, overruled.