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Inclusion of After Sale Service and Pre-delivery Inspection Charges in assessable value - Board wants cases sent to call Book


CBEC had 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.

BUT the Tribunal in Maruti Udyog - 2004-TIOL-317-CESTAT-DEL held that these charges are not includible in the assessable value as these do not accrue to the manufacturer.

But Tribunal in Maruti Suzuki case - 2008-TIOL-1929-CESTAT-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.”

The Supreme Court has in the case of Grasim Industries - 2009-TIOL-108-SC-CX, 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.

This issue was discussed in the recent Chief Commissioners conference at Shillong on 30 th and 31 st October 2009. The conference suggested that 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 Board has accepted the Conference recommendation and has direc ted the officers to issue Show Cause Notices and transfer them to Call Book pending decision of larger bench on the issue.

CBEC CIRCULAR NO. 909/29/09-CX, Dated : December 11, 2009

What is Call Book?

IT is the Central Excise Department's dumping yard. When they cannot decide an issue, it is thrown into the call book, almost never to be recalled. There are several Show cause Notices which are not decided and thrown into the call book. The CAG and the PAC have been concerned with the bulging call books.

In, Circular No. 162/73/95-CX.3, dated 14.12.95, the CBEC specified the following categories of cases which can be transferred to call book:-

1. Cases in which the Department has gone in appeal to the appropriate authority.

2. Cases where injunction has been issued by Supreme Court/ High Court/ CEGAT etc.,

3. Cases where audit objections are contested.

4. Cases where the Board has specifically ordered the same to be kept pending and to be entered into the call book.

The Board has also informed the field that the PAC has desired that a special review of all the cases of Provisional assessment, transferred to the call book should be immediately undertaken and follow-up action taken, in order to ensure that the prevalent instructions have been complied with and proper revenue is collected.

In CIRCULAR NO. 719/35/2003-CX, Dated : May 28, 2003, the CBEC again informed,

The matter has again been examined with reference to PAC's recommendation on Paras 2.5 and 2.6 of the C & AG Report for the year 1998-99 relating to inordinate delay for recovery of confirmed demands and non-adjudication of demands respectively contained in 39th Report. In this regard it is found that the existing instructions of the Board on the issue are not being scrupulously followed by the field formations. The pendency of call book cases continues to be very high. Therefore, the Board while reiterating its earlier instructions, has decided that the respective Chief Commissioner should monitor progress of disposal of call book cases specifically to see whether -

1. Call Book cases have been reviewed by the CCEs.

2. Any appreciable progress is noticed.

3. Any avoidable delays are there.

It is further directed that a one-time comprehensive review of all the pending call book cases will be done by respective CCEs. The Chief Commissioner may monitor such review periodically in their respective zones. The progress report of the call book cases should continue to mention in the MTR as well as in the monthly statements of the progress achieved in "Key Result Areas".

In 2007, [F.No. 208/31/07-CX-6 Dated : September 10, 2007] Board informed that as per the records of the Board, Board has issued such directions only for these issues namely

(i) excise classification of soaps (Bathing bars) vide F. No. 94/5/97-CX-3 Dated 16.11.1999.

(ii) excise duty leviable on lacquered/laminated/metalized plastic films vide F.No. 93/01/2005-CX-3 dated 23.1.2006; and

(iii) rebate on goods manufactured in area based exemptions and subsequently exported under rule 18 of the Central Excise Rules, 2002 vide F.No. 209/11/2005-CX-6 dated 14.8.2007.

However, it has come to the notice of the Board that apart from these issues, there are some other issues which are being shown as reasons for cases pending in Call Book. Therefore, Board wanted the field to submit the information of cases pending in Call Book on account of instructions issued by the Board.

Now Board has thrown one more issue into the call book, which will most probably be never recalled.

Anti Dumping Duty on Sodium Hydrosulphite – long story

PROVISIONAL anti dumping Duty was imposed on the import of Sodium Hydrosulphite originating in, or exported from the People's Republic of China by Notification No. 28/2001-Customs, dated: March 12, 2001. This Notification lapsed on 11.09.2001. But as far as the Board is concerned, notifications simply don't lapse; they can be resurrected.

By Notification No. 114/2001-Cus., dated 2-11-2001, the duty was again imposed, of course, with effect from the date of provisional imposition that is 12.03.2001. So this would have expired on 11.3.2006.

By Notification No. 25/2006-Cus., dated 10-3-2006, this notification was extended till the 11th day of March, 2007.

By Notification No. 108/2006-Cus., dated 16-10-2006, the duty was re-imposed for another five years.

And by Notification No. 109/2006-Cus., dated 16-10-2006, Notification No. 114/2001-Cus., dated 2-11-2001, was rescinded.

Now the duty is again imposed up to 15.10.2011.

Notification No. 133/2009-Cus., Dated: December 9, 2009

Anti - dumping duty on acrylic fibre - extended

THE Anti-dumping duty on acrylic fibre originating in or exported from Belarus imposed by Notification No. 117/2004-Cus., dated 30-12-2004, which would have expired on 29.12.2009, is now extended till 29.06.2010 – WELL WITHIN TIME. Congrats Board!

NOTIFICATION NO. 134/2009-Cus., Dated: December 9, 2009

Anti - dumping duty Cathode Ray Colour Television Picture Tubes - yet another resurrection

PROVISIONAL anti-dumping duty was imposed on import of Cathode Ray Colour Television Picture Tubes originating in or exported from, Indonesia, by Notification No. 31/2009-Cus., dated 27-3-2009 and this actually expired on 26.09.2009. Now definitive anti dumping duty on the product has been imposed, of course with effect from the date of provisional imposition that is 27.03.2009!

In fact the Designated Authority had recommended imposition of definitive anti dumping duty on 10 th September 2009 and the CBEC had 16 days to extend it within time – but nothing happens if you forget the sun set clause – you can always extend it retrospectively – government always has the luxury of sleeping and forgetting!

NOTIFICATION NO. 135/2009-Cus., Dated: December 9, 2009

Anti - dumping duty on saccharin - Continued

THE Anti-dumping duty on saccharin was imposed provisionally by Notification No. 54/2006-Cus., dated 6-6-2006. This would have expired on 05. 12. 2006. After a cool three months definitive antidumping duty was imposed by Notification No. 41/2007-Cus., dated 19-03-2007, of course with effect from 6.6.2006!

Now, after a midterm review, the duty is imposed again valid till 05.06.2011.

NOTIFICATION NO. 136/2009-Cus., Dated: December 9, 2009

Goods required for Mega Power Projects - Concessional Customs duty

GOODS required for the expansion of any existing Mega Power project will now attract a Customs Duty of 2.5%. A New Sl. No. 400A is added to Notification No. 21/2002. There is also an exemption from education Cess and additional Duty.

NOTIFICATION NO. 137, 138 and 139/2009-Cus., Dated: December 11, 2009

Jurisprudentiol – Tuesday's cases

Legal Corner IconCentral Excise

Once it is held that the allegation of suppression of fact with an intend to evade duty of goods was sustainable, it is axiomatic that such levy of penalty as provided under Section 11AC should be equal to amount of duty levied – HC

THIS appeal was entertained on the following substantial question of law:

"Whether the penalty amount mentioned in Section 11AC of the Central Excise Act, 1944, is the discretion of the Quasi Judicial Authority viz., the Tribunal."

The High Court perused the judgements of the Supreme Court in Union of India v. Dharmendra Textile Processors  - 2008-TIOL-192-SC-CX-LB and Union of India vs. M/s.Rajasthan Spinning and Weaving Mills - 2009-TIOL-63-SC-CX.

And concluded that when once the application of Section 11AC to a case is imperative, thereafter there could be no discretion in quantifying the amount of penalty, but the penalty must be imposed equally to the duty determined under Section 11A(2) of the Act.

Income Tax

Sums paid on voluntary retirement to extent of rupees five lakhs are exempted from being charged to tax by reason of section 10(10C). Jurisdictional High Court Order has to be followed by Tribunal - if two views are possible, a view which is favourable to the assessee has to be adopted – ITAT – by majority

THE following question was referred to the Third Member.

"That the CIT(A) erred in law in deleting the disallowance of the assessee's claim of exemption of Rs.5,00,000/- u/s. 10(10C) on the ground that Hon'ble Madras High Court in their order dated 12.03.2008 made on similar issue has ordered that no deduction u/s. 10(10C) is available to the employee if the schemes framed are not in accordance with the requirement of Rule 2BA of the I.T.Rules. The exemption of tax u/s. 10(10C) is available on the amount received under a scheme of voluntary retirement/voluntary separation framed in accordance with the guidelines prescribed and specified in Rule 2BA and that the Bombay High Court in their order reported in 300 ITR 180 decided that the monetary limit fixed administratively will not apply to the cases of substantial question of law."

Service Tax

CENVAT Credit not available on repairs, maintenance, civil construction, manpower recruitment and cleaning services provided for residential colony: CESTAT

IT is held that, as the respondent has not established nexus between any of the four services and the manufacture or clearance of excisable goods, the benefit of CENVAT credit in respect of such service cannot be allowed. It is ordered accordingly. However in a case of this nature, the assessee should not be penalised. This case involves rival interpretations of a provision of law. In typical cases of interpretative nature, penalties have been waived by this Tribunal. In this view of the matter, the order-in-original is sustained except in respect of penalty imposed by the original authority…

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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