YAMAHA MOTORS INDIA PVT. LTD. Vs. CCE

JUDGEMENT

(1.) THIS is an appeal against order in original dated 22/06/2005 passed by Commissioner of Central Excise, Delhi - IV by which duty demand of Rs. 1,57,61,037/ - was confirmed against the appellant under proviso Section 11A(1) of Central Excise Act 1944, along with interest on this duty at the applicable rate, as per the provisions of Section 11AB of the Act, and besides this, penalty of equal amount was imposed on the appellant under Section 11AC of the Act read with Rule 173Q(1) of Central Excise Rules 1944 Rule 25(1) of Central Excise Rules 2001/2002. The duty demand has been confirmed against the appellant in respect of clearances of motor cycles by them to their dealers during the period from 01/07/02 to 31/12/03 on the ground that while during this period, as per the appellant's agreement with their dealers, the dealers were providing free after sale service to the customers for which the dealers were being reimbursed by the appellant @ Rs. 70/ - per service, this amount was not being added to the assessable value, resulting in short payment of duty. According to department, the assessee failed to substantiate their claim regarding inclusion of after sale service charges in the assessable value and since they deliberately suppressed the information regarding the after sale service charges paid to the dealers, longer limitation period 5 years under proviso Section 11A(1) of the Act has been invoked for recovery of allegedly short paid duty and for the same reason, penalty under Section 11AC has been imposed.

(2.) HEARD both the sides.

(3.) AS per the appellant's agreement with their dealers, the dealers are required to provide certain number of free after sale services to the customers for which the dealers are reimbursed by the appellant. There is no dispute about this. Thus, the expenses of after sale service being provided by the dealers free of charge to the customers are borne by the appellant, the manufacturers. As per the definition of "transaction value", as given in the Section 4(3)(d), the 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 to, or on behalf of, the assessee, by the reason of or in connection with the sale, whether payable at the time of sale or at any other time, including but not limit to, any amount charged for or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outwards handling, servicing, warranty, commission or any other matter, but does not include the amount of duty of excise, sales tax and the taxes, actually paid on the goods. Thus the transaction value means the price excluding excise duty, sales tax and other taxes actually paid, which has been actually paid or is payable by the buyer to the assessee, including the amount which the buyer is required to pay on behalf of the assessee for the reason or in connection with the sale. It is this transaction value, which as per the provisions of Section 4(1)(a), is the assessable value of the goods, if the goods are sold by the assessee at the time and place of removal, the assessee and the buyer are not related and the price is the sole consideration for sale. Where any one of these conditions is not met, the assessable value, has to be determined under Section 4(1)(b) read with Central Excise Valuation Rules, 2000. Rule 6 of the valuation rules provides for determination of assessable value in a situation when the price is not the sale consideration of sale and in such a situation, the assessable value will be the declared invoice price plus the money value of the additional consideration flowing directly on indirectly from the buyer to the assessee.