Relief for Suzuki Motors: CESTAT Rules Expenses on Pre-Delivery Inspection and After-Sale Services Not Part of Assessable Value for Excise Duty [Read Order]
CESTAT held that expenses on pre-delivery inspection and after-sale services, whether reimbursed or included in dealer margins, cannot be added to the assessable value for excise duty.
Suzuki - excise - duty - Taxscan
Suzuki - excise - duty - Taxscan
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that expenses incurred on pre-delivery inspection (PDI) and after-sale services (ASS), whether reimbursed to dealers or included in dealer margins, are not part of the assessable value for the purpose of levying excise duty.
Suzuki Motorcycle India Pvt. Ltd., the appellant, is engaged in the manufacture and sale of two-wheelers and their parts. The vehicles were sold to dealers at an ex-factory price on which excise duty was paid.
As per the dealership agreement, dealers were responsible for carrying out pre-delivery inspections and free after-sale services for customers, and the cost incurred for such services was reimbursed by the appellant.
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During the audit, the department observed that Suzuki had not included the amount reimbursed to dealers for PDI and ASS in the assessable value of goods. It issued show cause notices alleging that such amounts formed part of the consideration for sale and should be included in the assessable value under Rule 6 of the Central Excise Valuation Rules, 2000.
The Commissioner confirmed the demand of Rs. 2.16 crore along with interest and penalty under Sections 11A, 11AA, and 11AC of the Central Excise Act, 1944. Aggrieved by the order, the appellant approached the tribunal.
The appellant’s counsel argued that PDI and after-sales services are carried out by dealers after the sale of goods and transfer of ownership, and such activities cannot be considered part of the transaction value. They further argued that the manufacturer already bore the reimbursements made to dealers and did not constitute additional consideration from customers.
The counsel relied on several judicial precedents, including decisions in the appellant’s own earlier cases, which held that such expenses are not includible in assessable value. The appellant also contended that the issue was interpretational and, therefore, penalty and extended limitation were not justified.
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The revenue counsel reiterated the findings of the Commissioner’s order and maintained that PDI and ASS were services rendered by dealers on behalf of the manufacturer, forming part of the consideration for sale.
The two-member bench comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the issue was already settled in the appellant’s favor in earlier decisions and there was no evidence that any additional amount collected by dealers had flowed back to the manufacturer.
The tribunal explained that the transaction value under Section 4 of the Central Excise Act is the price paid by the dealer to the manufacturer, and no further addition can be made without proof of extra consideration.
The tribunal set aside the Commissioner’s order, holding that the reimbursements for PDI and after-sales services cannot be added to the assessable value. The appeal was allowed with consequential relief to the appellant.
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