Per CN.B. Nair :

The appellant M/s. Maruti Udyog Limited (MUL) is a manufacturer of automobiles. They sell the automobiles produced by them to dealers at ex-factory prices. They also fix maximum selling price for re-sale of the products in retail to customers. The dealers cannot exceed those maximum selling prices while selling the automobiles to retail buyers. The dealership agreement also specified the commission which the dealer shall receive from customers. The dealership agreement also stipulate the service which a dealer shall render to the buyer. Clause 39 under Article 9 (servicing) of the dealership agreement states as under:-

39. PDI AND AFTER SALES SERVICE:

"The Dealer shall ensure that the pre-delivery inspection and after-sales service for Vehicles are carried out fully and efficiently in accordance with the requirements and policies of the Company established from time to time. In particular the Dealer shall at all times make complete and accurate reports in the form and at the times required by the Company in respect of all work carried out by it in pursuance of the Company's Service requirements and policies. The Dealer shall also maintain a Service history of each vehicle serviced by it in a form required by the Company."

2. The dispute for consideration in the present appeal is whether the cost of the above Post Delivery Inspection (PDI) and sale service are to form part of the assessable value of the automobiles while discharging Central Excise duty. Impugned order has held that these charges should form part of the assessable value. We read the finding:-

"The facts conveyed by the department in show cause notices, are that each vehicle, sold by M/s. MUL, carried a warranty for a given period, and that to remain eligible for that warranty, the buyer of each vehicle had to pay Rs. 850/- on account of Pre Delivery Inspection and initial three services (hereinafter referred to as PDI). These facts, since not disputed by M/s. MUL, lead me to an inference that the amount, paid by the buyer of the vehicle on account of PDI, had a direct nexus with the warranty."

The further relevant facts, conveyed by the department, are that the amount of Rs. 850/- charged from the buyer on account of PDI, was built by M/s. MUL into the "dealer's margin/commission", which, coupled with 'ex-factory price', constituted the 'ex-show room price', and that this evinced that the PDI charges were collected by the dealer on behalf of M/s. MUL. On the basis of these facts, the department alleged that the PDI charges, collected on or after 1.7.2000, formed the part of 'transaction value' as defined in section 4(3)(d) of the Central Excise Act, 1944, and required the payment of duty leviable thereon, but M/s. MUL did not pay the same inspite of having been instructed by the department to do so. M/ s. MUL, in this regard, have contended that though the amount of PDI was fixed, or increased/decreased periodically by them, in order to have a uniformity amongst all dealers, and they acted as arbitrator in case of dispute between dealers in this regard, yet the fact is that the amount in question was neither received by M/s. MUL, nor the dealers were ever instructed to transmit that amount to M/s. MUL. I find that it is also not the case of the department that amount was directly received by MUL. The allegation advanced by the department is that the PDI charges were linked to warranty, and that the same were being collected by the dealers on behalf of M/s. MUL. The cardinal question for determination, thus, is, whether or not the PDI charges, in these circumstances, would fall within the ambit of transaction value as defined in Section 4(3)(d) of the Central Excise Act, 1944, which reads as following:-

"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 reasons of or in connectio