prpri Larger Bench decision on the concept of ‘transaction value’ Larger Bench decision on the concept of ‘transaction value’

Case Law Details

Case Name : M/s Maruti Suzuki India Limited Vs CCE (CESTAT Delhi)
Appeal Number : Delhi-III (2010-TIOL-1 127- CESTAT-DE-LB)
Date of Judgement/Order :
Related Assessment Year :

Brief: The appellants, manufacturers of motor vehicles, entered into dealership agreements with their dealers. The agreement provided for servicing and warranty including free service. The dealers margin covered pre- delivery inspection and three after sales services. The issue, therefore, was whether such pre- delivery inspection and after- sale-service charges are to be included in the asses sable value of the goods for determining the duty liability under the Central Excise Act, 1944 (the Act).

Citation: CESTAT Larger Bench decision in the case of M/s Maruti Suzuki India Limited Vs CCE, Delhi-III (2010-TIOL-1 127- CESTAT-DE-LB)


 Contentions of the Appellant

The appellants contented that the definition of the expression “transaction value” contained in the statutory provision existing prior to the amendment makes no difference to the legal provision subsequent to 1-7-2000. Further, the issue was already decided in their favour by the Tribunal and the appeal filed by the Department was dismissed by the Supreme Court.

 Contentions of the Respondent

The respondent contended that the amended Section 4 of the Act has incorporated the concept of „transaction value? for the purpose of assessment in place of earlier concept of „normal wholesale price?. Thus, taking into consideration the concept of „transaction value?, whatever is recovered from the buyer by reason of or in connection with sale whether payable at the time of sale or any other time, directly or indirectly, to the manufacturer or paid on behalf of the manufacturer to the dealer including the charges for servicing and warranty is to be included in the transaction value.

 Observations of CESTAT

The Hon?ble CESTAT observed that the Tribunal decision referred by the appellant was decided not on the point of law but on facts of the case and therefore, it cannot be said that the issue is concluded by the said decision. Further, the Bench also observed that the Departmental appeal to the Supreme Court was not dismissed on merits but was dismissed merely on the ground of inordinate delay in filing the appeal.

The following observations were made by the Larger Bench of the Hon?ble CESTAT in respect of the concept of “transaction value”–

  • · As per the definition of „transaction value?, it does not merely include the amount paid to the assessee towards price but also includes any amount a buyer is liable to pay by reason of or in connection with the sale of goods, including any amount paid on behalf of the assessee to the dealer.
  • · The transaction value is not confined to the amount actually paid and is not restricted to the flow back of consideration or part thereof to the assessee directly but even for discharge of sales obligations both in present and future in pursuance of the contract between the dealer and the assessee.
  • · The terms used in the definition of „transaction value? such as, „means?, „includes?, „including but not limited to? signify that it is a definition of extensive nature and at the same time the words „but does not include? are restrictive and exhaustive in relation to the items to be excluded therefrom.
  • · The term „transaction value? does not disclose that the elements to be included in the assessable value would depend upon direct flow back of the consideration to the assessee. Such a conception shall defeat the spirit of amendment to the law. Even indirect benefit in that regard, wholly or partly, resulting from the payment made by the buyer to the dealer in connection with or by reason of the sale transaction will have to be included in the asses sable value.

Conclusion:- Larger Bench held any amount payable by the buyer, directly or indirectly, to the assessee by reason of or in connection with the sale of goods would be included in the transaction value of the goods for the purpose of determining the duty liability. Hence, charges collected by the dealer on account of pre- inspection delivery and after sales service would form part of the transaction value of the goods.


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August 2021