Custom, Excise & Service Tax Tribunal
M/S Hero Honda Motocorp Ltd vs Cce, Delhi Iii on 19 September, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 17/07/2014. DATE OF DECISION : 19/09/2014. Excise Appeal No. 2984 of 2010, Nos. 2389 and 2498 of 2011 and 1705 of 2012 [Arising out of the Order-in-Original No. 04/SSS/CE/2010 dated 25/06/2010 passed by The Commissioner of Central Excise, Delhi III, Gurgaon.] For Approval and signature : Honble Ms. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) 1. Whether Press Reporters 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? M/s Hero Honda Motocorp Ltd. Appellant Versus CCE, Delhi III Respondent
Appearance S/Shri S. Ganesh, Sr. Advocate and P.K. Ram, Advocate for the appellant.
Shri Pramod Kumar, Authorized Representative (Jt. CDR) for the Respondent.
CORAM : Honble Ms. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) Final Order No. 53662-53665/2014 Dated : 19/09/2014 Per. Archana Wadhwa :-
As all the appeals involved the same issue, all are being disposed of by a common order. However for the sake of reference, facts, as available in appeal No. E/2984/2010 are being referred to.
E/2984/2010 The appellants are engaged in the manufacture of motor cycle, engine and parts and spares of the same falling under Chapter 87 of Central Excise Tariff Act. The said excisable goods are being cleared by them on payment of duty by adopting the transaction value and after availing the Cenvat credit of duty paid on the inputs and capital goods.
2. As a result of audit objection, Revenue entertained a view that the noticee was receiving additional consideration over and above the price of their finished goods from the dealers, which additional consideration is required to be added in the assessable value of their final product. The said additional consideration was from the dealers, which was being received by them on account of dealers staff training. Further the appellants have floated a passport programme under which buyers/owners of Hero Honda Motor Cycle were entitled to become the Member of scheme on payment of sum of Rs. 95/- per customer, which was being recovered from the dealers. In terms of the said scheme, the passport holders are entitled to free accidental insurance cover for one year worth Rs. 1 lakhs, invitation to events, musical nights, carnivals, monthly news letter of the company and information on motor cycle maintenance, accumulation of points on purchase of spares and service of motor cycle. Further the appellant was also recovering amounts from their dealers by issuing a debit note in respect of the expenses incurred with the activity of sending birthday cards and marriage anniversary.
3. By entertaining a view that all the receipts of the appellant from their dealers were in the nature of extra consideration and was required to form part of the transaction value in terms of new Section 4 of the Central Excise Act, 1944, which came into force w.e.f. 01/07/2000, proceedings were initiated against the appellant by way of issuance of the show cause notice dated 06/11/08. The notice proposed confirmation of demand of duty of Rs. 20,08,36,738/- by invoking the longer period of limitation for the period October 2003 to August 2008. The proposal to impose penalty was also made in the said show cause notice.
4. During the course of adjudication, the appellant took a categorical stand that they are manufacturing and selling motor cycle from their Gurgoan factory on the transaction value entered into by them with the dealers, thus satisfying all the ingredients of Section 4 of the Central Excise Act. All the three schemes i.e. dealer staff training, passport programme as also birthday and marriage anniversary cards scheme are being handled from their head office and by no stretch of imagination, it can be held that such receipts are in connection with the motor cycles sold from their Gurgaon factory when admittedly they have other factories also located at different places. They also contended that the expenses incurred by them on all the three schemes are much more than the amounts so received. The demand was also challenged on the point of limitation by drawing the attention of the Adjudicating Authority to the fact that all the three schemes were in the knowledge of the Revenue as is clear from the correspondence exchanged by the appellant with their Jurisdictional Central Excise Authorities as is clear from the fact that number of audits were conducted during the relevant period.
5. The Adjudicating Authority, however, did not find favour with the appellants contention and by rejecting their plea on merits as also on the time bar, confirmed the demands, as proposed in the notice alongwith interest and imposition of penalty of identical amount under Section 11AC of the Act readwith Rule 25 of the Central Excise Rules, 2002.
Identical demands were confirmed in other cases.
Hence, the present appeals.
6. After hearing both the sides duly represented by Shri S. Ganesh, Sr. Advocate and Shri P.K. Ram, Advocate for the appellant and Shri Pramod Kumar, Jt. CDR for the respondent, we find that the Adjudicating Authority has mainly relied upon the provisions of Section 4 of the Central Excise Act readwith the definition of transaction value as appearing in the said Section. For better appreciation the relevant provisions of the said Section are reproduced below :-
Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value ;
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
{Explanation :- For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty payable on such goods.} (2) ..
(3) For the purpose of this section, -
(a) .
(b) .
(c) .
(c) transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.
In terms of the said Section, the price actually paid or payable by the customer for the excisable goods including the amount charged for or to make provision for advertising or publicity, marketing and selling organization expenses and others is to become a part of the transaction value. In the light of the above Section 4 and the definition of transaction value, we proceed to decide the various alleged additional consideration received by the appellant in terms of various programmes.
(1) Dealers staff training :- For the purpose of providing training to the staff of the dealers, a Circular stands issued by the appellant detailing that in as much as they give special emphasis on improving the product knowledge and technical development of workshop staff, they have set up zonal training centres in each zone. Training programmes at level I and level II would be conducted in the said training centres and level III programme shall be conducted at National Training Centres. The said circular is further to the effect that while the investment cost of new development training and manpower would primarily be borne by the assessee, some course fee/charges would be recovered. For training at zonal level no course fee stands prescribed but the candidates would be charged an amount of stay. For training at National Training Centre a separate course fee per course will be charged in addition to said charges. As per the appellant, these programems are conducted to impart skill and knowledge, developing softer skill and etiquettes, customer relationship, attitudinal training, inventory control and house keeping for spare parts. The said programme is a need base programme and an optional programme. They have established it from the data chart produced before us that out of huge number of dealers and their staff, only 1108 persons were given the dealers staff training, which establishes that it is not binding for the dealer to undertake the said programme. Further the expenses of training such as content development, travel boarding/lodging to outside trainer and company personnel, food, tea and snacks are fully borne by the company. Only training hall charges, cost of hiring training equipment like projectors, PA system etc. is recovered at 50% cost from the dealers and 25% from the service point dealers.
As is seen, the dealers staff training programme is a scheme innovated and executed from the head office of the company and not from the factory located at Gurgaon. The same is aimed at providing better technical knowledge about the goods and the soft training to the various field staff, for the purpose of understanding the product and further extending the same to their customers. The appellant is bearing the main expenses and it is only a part of the expenses towards training hall charges, cost of hiring of training equipment which is being recovered from the dealers as a contributory expenses. The said activity of training the staff of the dealers by no stretch of imagination can be held to be a consideration for the sale of the motor cycle to the dealers. Observing again, at the cost of repetition, such training of the staff is absolutely optional for the dealers and it is seen that only a small percentage of the total staff of the dealers have undertaken such training during the relevant period in question. The same being in-connected with the sale of the motor cycle, we find that no favour with the Revenues stand that the same is a consideration towards the sale of the motor cycle. If the same is a part of the sale value of the vehicle, the same would have been collected from each and every dealer, who would have further collected it from the customers.
(2) Passport Programme :- The Revenue has alleged that the appellant has collected additional consideration in the guise of passport programme from their dealers. The said passport programme is a scheme meant for all the persons who are buyers/owners of Hero Honda Motor Cycle and are entitled to become Member of the scheme on payment of a sum of Rs. 95/- per customer. In return to the said membership, they are given the facilities of free accidental insurance cover for one year, monthly news letter of the company, updating of the maintenance of the motor cycles as also invitation to events, musical nights and carnivals etc. It is seen that the registration charges of Rs. 95/- per persons are paid by the person who is buying the motor cycle and not by the dealer. The appellants have placed before us the figures to show that the registration charges collected by them are less than the actual amount spent by the head office of the noticee under the said scheme and thus there is no additional payment. We also note that the said scheme is an optional scheme and a person who wants to enjoy the additional benefits given by the assessee, is required to pay a part amount. If the customer does not want to become a Member of the said scheme, he is at liberty to do so. The said small collection of Rs. 95/- per person/buyer of the motor cycle is not a consideration towards the sale of the motor cycle in as much as in lieu of said collection, the assessee is providing various other facilities to the buyer. As such, the said consideration has to be held as receipt of the amounts for letting the buyer enjoy the other benefits to be provided against such collection of the amount. Even otherwise also we find that the expenses incurred by the appellants head office are much more than the collection made under the said head. As such, we agree with the learned Advocate that such collection of money from the persons who opt for the scheme, can, by no stretch of imagination, be held to be a part of the transaction value.
(3) Birthday and Marriage Anniversary Cards :- Based upon the information of Members registered under the passport scheme, the appellants were sending birthday and marriage anniversary cards to the said persons, for which purpose they have a central agency. A part of the said expenses were being recovered by the appellants from their dealers by issuing debit notes to them. The Revenue has held the said realization is a consideration for the value of the motor cycle sold to the dealers. According to the appellant such sending of birthday and marriage anniversary cards cannot be held to be transaction value under Section 4 of the Act in as much as these were post removal expenses, which had no connection or relation for sale of the motor cycle to the dealers. Consideration amount stands already paid by the dealer at the time of clearance of the motor cycle from their factory gate and the said activity of sending of birthday/marriage anniversary card to their customers is an activity unconnected with the sale of the excisable goods.
For the reasons recorded for the earlier two activities, we hold that the said expenses are not connected with the sale of the goods and as such cannot be held to be part of the transaction value.
7. Though we have held in favour of the assessee on all the three disputed issues, we also note that the demand is squarely barred by limitation having been raised by invoking the longer period of limitation. The appellants have brought on record the correspondence exchanged between them and their Jurisdictional Superintendent in February 2003 itself wherein the entire information was disclosed. Apart from that the audit has taken place for each financial year and all the papers/documents were scrutinized and no objection was raised. From the above, it is the contention of the appellant that no malafide can be attributed to them.
The said plea of the appellant stands rejected by the Commissioner by observing simplicitor that under the self-assessment scheme, it is the responsibility of the assessee to pay the legitimate dues and to honestly calculate the excise duty. We do not find any favour in the said observations and findings of the Adjudicating Authority. If the general ground that in the era of self-assessment the assessees are required to calculate the excise duty by being an expert in the field, is adopted as a reason for holding the demand as not barred by limitation, we are afraid that there would not be any demand, which would be held barred by limitation. When there is a clear evidence on record to show that the entire information was being given to their Jurisdictional Central Excise authorities, who are also expected to be experts, it cannot be said that the appellant should have paid the duty on the disputed items, in question. Apart from that we find that the issue involved is a bonafide issue of interpretation of the provisions of law. As such, we are of the view that the demand having been raised by invoking the longer period of limitation is totally barred.
As we have held in favour of the appellant in respect of appeal No. E/2984/2010, we also allow the other appeals viz. E/2389 and 2498 of 2011 and E/1705 of 2012, which involve an identical dispute.
8. In view of the above, we set aside the impugned orders confirming demands and imposing penalties and allow the appeals on merits as also on limitation.
(Order pronounced in the open court on 19/09/2014.) (Archana Wadhwa) Member (Judicial) (Rakesh Kumar) Member (Technical) PK ??
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