Custom, Excise & Service Tax Tribunal
Eicher Tractors Ltd vs Cce, Bhopal on 5 September, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing/Order : 5.9.2014
Appeal No. E/2145/2006-EX(DB)
[Arising out of Order-in-Appeal No. 48/Appeal/Bhopal/2006 dated 20.3.2006 passed by the Commissioner of Central Excise (Appeals), Bhopal]
For Approval & Signature :
Honble Mr. Justice G. Raghuram, President
Honble Mr. R.K. Singh, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
Eicher Tractors Ltd. Appellant
Vs.
CCE, Bhopal Respondent
Appearance:
Shri Amit Jain, Advocate - For the Appellant
M.s Sweta Bector, D.R. - for the Respondent
Coram : Honble Mr. Justice G. Raghuram, President
Honble Mr. R.K. Singh, Member (Technical)
F. Order No. 53812/2014
Per R.K. Singh :
This appeal has been filed by M/s Eicher Tractors Ltd. (hereinafter referred to as the appellants) against Order-in-Appeal No. 48/Appeal/Bhopal/2006 dated 20.3.2006 which upheld the order-in-original relating to the confirmation of demand of Rs.7,01,137/- along with interest but reduced the penalty from Rs.1,40,00/- to Rs.1,00,000/-
2. The facts, briefly stated, are as under:
The appellants manufacture tractors which are chargeable to duty on ad valorum basis. They sell tractors through a network of dealers spread throughout the country. The dealers provided afterfree sales service to the buyers of tractors during the warranty period at their cost. A scheme of labour service performance discount (LSPD) was introduced with effect from 1.11.2001 for multi cylinder tractors. Under this scheme credit of Rs.1280/- was given to the dealers for 12 labour free services. The said scheme was extended to single cylinder tractor in terms of which credit of Rs.750/- was given to the dealers for 6 labour free services. The adjudicating authority held that labour service performance discount was includible in the assessable value and consequently confirmed the impugned demand and imposed the penalty as above. The Commissioner (Appeals), as stated above, upheld the finding of the adjudicating authority holding that the said discount was includible in the assessable value under Rule 6 of the Valuation Rules 2000 as the same was an additional consideration. The appellants have contended that the discount was known at the time of sale of tractors to dealers and nothing flowed back from the dealers to the appellants and hence the said discount is not includible in the assessable value. They cited several judgements in their favour.
3. We have considered the appellants submissions. We find that the Supreme Court in the case of Phillips India Ltd. Vs. Collector 1997 (91) ELT 540 (SC) held such discount to be not includible in the assessable value. In para 6 of the said judgement the Honble Supreme Court observed as under :=
6. As to the after sales service that the dealer was? required under the agreement to provide, it did of course enhance in the eyes of intending purchasers the value of the appellants product, but such enhancement of value enured not only for the benefit of the appellant; it also enured for the benefit of the dealer for, by reason thereof, the dealer got to sell more and earn a larger profit. The guarantee attached to the appellants products specified that they could be repaired during the guarantee period by the appellants dealers anywhere in the country. Thus, though one dealer might have to repair goods sold by another dealer and incur costs in that regard, he also had the benefit of having the goods he sold reparable throughout the country. The provision as to after sales service, therefore, benefited not only the appellant; it was a provision of mutual benefit to the appellant and the dealer.
4. In the case of Mahindra & Mahindra Ltd. Vs. CCE 1998 (25) RLT 547 (Tri.-Del.) the CESTAT also decided the issue in favour of the assessee following the judgement of the Supreme Court in the case of Philips India Ltd. (supra). In the case of Tata Motors Ltd. Vs. Union of India 2012 (286) ELT 161 (Bom.), the Bombay High Court observed that amendment to Section 4 with effect from 1.7.2000 did not make any material difference. In that case the High Court in para 45, 47, 48 and 49 held as under :
45.?On consideration of the Clause 7 of Circular dated 1st July, 2000, it is apparent that the respondents have brought into existence a deeming provision that is to say the respondents have treated all the manufacturers of cars on one platform and by fiction taken a decision to add the expenses incurred towards PDI and said services in the assessable value. It will have to be mentioned that in all cases where the expenses incurred towards PDI and said services are solely borne by the dealer and the manufacturer like petitioners 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) r/w Section 4(3)(d) of the said Act. Looking to the facts and circumstances of this case, the respondents have not been able to place on record any material to show that the amount incurred towards PDI and said services can fall within the definition of the transaction value.
47.?This assertion viz. Expenses for the PDI and said services is not to be included in the assessable value is at variance from Circular dated 1st July, 2002. The Clause 7 of Circular dated 1st July, 2002, in our view wrongly proceeds to hold that the expenses incurred by the dealer towards PDI and said services are on behalf of the assessee hence, it is wrong to say that such expenses form as one of the considerations for the sale of goods. In our view, equating the expenses incurred towards PDI and said services with the advertisement and publicity charges is incorrect. In our view. Clause No. 7 of Circular dated 1st July, 2002 is not in conformity with the provisions of Section 4(1)(a) r/w Section 4(3)(d) of the said Act.
48.?The matter can be looked from yet another angle namely; a perusal of the term transaction value would show that servicing is one item, which is included in the definition of the term transaction value. In our view, on the basis of record it is clear that the petitioners do not render any services to the dealer and no cost is incurred by the petitioners qua the dealer towards the term servicing. As such, the petitioners have not included any amount in the assessable value with reference to term servicing and as such the expenses incurred towards PDI and said services, which expenses are incurred solely by the dealer without reference to the petitioners cannot be included in the term servicing appearing in the term transaction value. For the reasons mentioned aforesaid if a dealer incurs expenses towards the PDI as well as free after sales services without reference to the manufacturer like petitioners, then, the said expenses incurred by the dealer cannot form a part and parcel of the assessable value. To that extent, Clause 7 of the Circular dated 1st July, 2002 is illegal and void and is contrary to the provisions of Section 4(1)(a) r/w Section 4(3)(d) of the said Act. Similarly, the Circular dated 12th December, 2002 to the extent it confirms Clause 7 of Circular dated 1st July, 2002 is void and illegal.
49.?For all the aforesaid reasons, we hold that as per Section 4(3)(d) of the Central Excise Act, 1944 the PDI and free after sales services charges can be included in the transaction value only when they are charged by the assessee to the buyer. The impugned circulars, inter alia, purport to hold that where the assessee sells the motor vehicles to a dealer (buyer) at a given price and the dealer in turn sells the said motor vehicles to a customer at a price with dealers margin which includes the PDI charges and after sales service charges, then, the assessable value for determining the Central Excise duty payable by the assessee has to be determined by including the PDI and after sales service charges even if they are not been charged by the assessee to the dealer, which in our opinion is contrary to the provisions of Section 4(3)(d) of the Central Excise Act, 1944 and, hence, liable to be quashed and set aside. Whether the adjudicating authority in the present case is justified in including the PDI and after sales service charges is a question to be decided in the appeal, if any, filed against the order-in-original.
ORDER
(i) The question framed is answered in favour of the petitioners i.e. assessee and against the respondents i.e. the Revenue.
(ii) In the facts and circumstances of the case, there shall be no order as to costs.
5. The CESTAT in the case of Yamaha Motors Pvt. Ltd. Vs. CCE 2008 (231) ELT 677 (Tri.-Del.) has also held that such discount was not additional flowing from dealer to the manufacturer and therefore was not includible in the assessable value. Incidentally, CBEC vide its Circular No. 354/81/2000-TRU dated 30.6.2000 in para 9 thereof regarding discount has clarified as under :
9 Thus if in any transaction a discount is allowed on declared price of any goods and actually passed on to the buyer of goods as per common practice, the question of including the amount of discount in the transaction value does not arise. Discount of any type or description given on any normal price payable for any transaction will, therefore, not form part of the transaction value for the goods, e.g. quantity discount for goods purchased or cash discount for the prompt payment etc. will therefore not form part of the transaction value.
6. In view of the foregoing discussion including the judicial pronouncements cited above, we allow the appeal and set aside the impugned order.
(Justice G. Raghuram) President (R.K. Singh) Member (Technical) RM 1