Circular No. 909/29/09-CX
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Custom
New Delhi, the 11 December 2009
To,
Director General (All)
Chief Commissioners of Central Excise including LTU (All)
Commissioners of Central Excise (All)
Sir/Madam
Subject: Inclusion of After Sale Service and Pre-delivery Inspection Charges in
the assessable value.
Please refer to the Minutes of the Conference of Chief Commissioners at Shillong
on 30th and 31st October 2009 with regard to the issue mentioned above at point
No 2.9.
- On this issue, the Board has vide point No 7 in circular No. 643/34/2002-CX
dated 1-7-2002 clarified as follows:
| What about the cost of after sales service charges and pre delivery inspection
(PDI) charges, incurred by the dealer during the warranty period ?
|
Since these services are provided free by the dealer on behalf of the assessee,
the cost towards this is included in the dealer's margin (or reimbursed to him).
This is one of the considerations for sale of the goods (motor vehicles,
consumer items etc.) to the dealer and will therefore be governed by Rule 6 of
the Valuation Rules on the same grounds as indicated in respect of Advertisement
and Publicity charges. That is, in such cases the after sales service charges
and PDI charges will be included in the assessable value. |
- The tribunal in the case of Maruti Udyog Limited [2004 (170) E.L.T. 245 (Tri.
- Del.)] held that these charges are not includible in the assessable value as
these do not accrue to the manufacturer. But recently, the Tribunal has in the
case of Maruti Udyog Ltd, [2009 (238) ELT 186 (T-Del)] doubted the correctness
of its earlier decision referred to above, and referred the following question
for consideration by a Larger Bench.
“Whether the charges towards pre-delivery inspection and after-sale-services
received by dealers from buyers of the cars are to be included in the assessable
value of cars in the light of the definition of ‘transaction value’ given in
Section 4(3)(d) of the Central Excise Act.”
- Further, the Supreme Court has in the case of Grasim Industries (C.A.
No.3159/2004), referred the question as to whether the concept of transaction
value under new Section 4 has made any material departure from deemed normal
price concept of erstwhile Section 4(1)(a) of the Act for consideration of the
Larger Bench.
- In view of the above decisions referring the matter to larger bench, the
conference was of the view that in this matter show cause notices should be
issued demanding duty on the value of these activities, and transferred to Call
Book pending the decision of Larger Bench on the issue.
- The view expressed in the Chief Commissioners Conference has been accepted by
the Board and accordingly you may direct the officers in your jurisdiction to
continue issuing show cause notice and transfer them to call book, pending the
decision of larger bench on the issue.
- Receipt of this circular may be acknowledged
- Hindi version would follow.
Yours faithfully
Madan Mohan
Under Secretary (CX.1)
F.No. 6/44/2000-CX1
F.No. 6/4/2009-DS (CX.1 & 4)