Government of India
Ministry of Finance
Department of Revenue, New Delhi
Subject: Central Excise – Inclusion of cost of after sales services during the initial running in period of the vehicle by the dealers to their own buyers in the assessable value of the vehicle-Delhi High Court decision dated 9.9.98 in the case of M/s Hindustan Motors Ltd. v. Union of India – regarding.
A copy of the Delhi High Court Order dated 9.9.98 in the case of Hindustan Motors v. Union of India is enclosed.
2. As directed by the Delhi High Court, the Board has reconsidered the Circular No. 335/71/97-CX. dated 18.11.97 in the light of the CEGAT judgement dated 13.2.98 in the case of Mahindra & Mahindra Ltd. v. CCE, Bombay [1998(103) ELT 606 (T)].
3. As far as inclusion of after sale services in the assessable value in concerned the CEGAT order dated 13.2.98 is mainly based on Supreme Court decision in the case of M/s Phillips India Ltd. v. CCE, Pune. However, the CEGAT has not taken into account the Board”s Circular dated 19.11.97, the reasoning given therein and the fact that the facts of the case of M/s Phillips Ltd. and those facts where Circular will be applicable were differentiated in the Circular, while delivering the said judgement.
4. The Board has also examined the other reasoning given in the CEGAT judgement dated 13.2.98 and finds that there are no adequate reasons to revise the Board”s circular dated 19.11.97.
5. Incidentally, Board has filed an SLP against CEGAT judgement in the case of M/s Mahindra & Mahindra Ltd. dated 13.2.98.
in the case of M/s Hindustan Motors Ltd. & Ors. v. UOI & Ors.
in C.M.P. No. 2086/98 in C.W.P. No. 1216/9809.09.1998
Present: Mr.N. Chandrasekharan, Sr. Adv. with Mr. C. Hari Shankar for the petitioner.
Mr. Mahinder Singh for the respondent.
CW No. 1216/98 & CM 2068/98
Though a written counter and reply have not been filed in view of a purely legal issue arising for decision in this petition the learned counsel for the parties are heard finally with their consent. The petition in disposed of in terms of the following order:-
The petitioner is aggrieved by Circular No. 355/71/97-CX issued by Central Board of Excise and Customs whereby the adjudicating authorities have been directed to see that the value of the provision for rendering PDI and three after-sales services by dealers being on behalf of manufacturer, was includable in assessable value of goods. This circular refers to decided cases of Bombay Tyre International, Phillips India Ltd. and M.R.F. cases.
The CEGAT has delivered a judgement in M/s Mahindra & Mahindra Ltd. (Annexure-H) on 13.2.1998 wherein the CEGAT has taken into consideration the entire case law available on the point and also referred to the three decisions set out in the impugned circular. The CEGAT has opined that part of dealers” margin referable to cost of free after-sales-services cannot be included in the assessable value.
The submission of the petitioner is that the Circular which runs in conflict with the view of the law taken by the Tribunal has ceased to be goods in the eyes of the law. The Assessing Authorities are bond of follow the circular of the Board in view of the mandate contained in Section 37B of the Central Excises Act, 1944 under which provision the Circular has been issued. It is further submitted by the learned counsel that so long as the circular remains in operation, the orders of adjudication made pursuant thereto would not be in conformity with the view taken by the CEGAT and this conflict in bound to create an anomaly for an order of the CEGAT also binds the adjudicating authorities.
In view of the law laid down the Supreme Court in the cast of Orient Paper Mills Ltd. v. Union of India 1978(2) ELTJ 345 and thereafter by the High Courts of Gujarat & Madras in Geneset Engineers Pvt. Ltd. v. Union of India (1989) 43 ELT 24 and Lakshmi Machine Work Ltd. v. Union of India 1992 (57) ELT 211, a circular issued by the Board under Section 37B of the Central Excise Act, 1944 cannot interfere with or take away quasi judicial function of the adjudicating authorities.
The petition is, therefore, allowed and disposed of in terms of the following directions:-
1. The Central Board of Excise and Customs may reconsider, if so advised, its impugned Circular in the light of the judgement of the CEGAT in the case of M/s Mahindra & Mahindra Ltd. (Supra) and such other decisions as are available and have a binding effect on the issue under consideration and may thereafter issue a fresh circular, if required.
2. Till the date of such reconsideration and issuance of fresh circular, if any, the impugned circular dated 19.11.97 shall not bind the adjudicating authorities while passing the orders of adjudication.
The petition in disposed of in the above said terms. No. order as to costs.
September 09, 1998.
Seal of the High Court of Delhi.