Discount Offered is not Includible in Assessable Value of Demo Vehicles: CESTAT Rejects Service Tax Appeal [Read Order]

The Customs, Excise and Service Tax AppellateTribunal (CESTAT), Chennai Bench recently held that the discount offered would not be includible in the assessable value of demo vehicles and rejected a service tax appeal filed by a finance corporation.

The Revenue department raised a demand alleging that the discount offered by the appellant, M/s. Hindustan Motor Finance Corporation Ltd. on the demo vehicles to its dealers are not deductible under Section 4 of the Central Excise Act, 1944. The appellant then appealed to the CESTAT on the issue of valuation of demo vehicles sold to the dealers.

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The counsel of the appellant submitted that demo vehicles, though similar to the normal vehicles, belong to a separate class which is clear from the demo vehicle policy that requires separate documentation of the engine number and chassis number.

The tribunal referred to Ford India Pvt. Ltd. v. Commissioner of Central Excise, Chennai and Hyundai Motor India Ltd. v. CCE & ST, LTU Chennai, where the Supreme Court dismissed appeals on a similar issue raised.

In the case of Hyundai Motor India Ltd., it was held:

“...Tribunal had consistently upheld the demand of differential duty on Demo Cars and rejected the assessee’s appeals except waiving the penalties…

…Since the demo car is not at normal sale, but with a condition that it should be used for demonstration purpose/test drive, the price charged for the sale of demo cars is not a normal transaction at the time of place of removal…

…As rightly clarified by the Board in their Circular No. 6/40/2002-CX, 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 and redetermined the price as per normal car and demanded the differential duty…”

With reference to the above, the two member bench comprising Vasa Seshagiri Rao (Technical Member) and P. Dinesha (Judicial Member) did not find any merit in the appeals and dismissed the same.

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