K.L. Rekhi, Member (T)

1. The point in dispute is whether (1) the dealers' margin of Rs. 550/- per motor cycle and (2) freight and insurance should be deducted from the sale price of motor cycles manufactured by the Respondents in order to arrive at their assessable value under Section 4 of the Central Excises Salt Act, 1944.

2. The dispute relates to the initial period from October-November 1985 to the 2nd February 1986. The Respondents commenced manufacture of Yamaha RX-100, 100 CC motor cycles during October-November 1985. They did not appoint wholesale dealers/distributors straightaway for marketing these motor cycles. The initial pattern of sale of the motor cycles as contained in the Respondents' letter dated 7-10-1985 addressed to the Superintendent of Central Excises, and as" amplified later during the course of hearing before us, was as follows :-

The Respondents advertised for Yamaha RX-100, 100 C.C motor cycles for booking orders directly from the public. Individual customers from the public contacted the dealers appointed by the respondents for booking orders. These dealers booked orders from customers on payment of deposit of Rs. 1000/- per motor cycle. The customer paid the deposit by means of a demand draft made out in the respondent's name. The customer gave this demand draft to the dealer who transmitted the customer's order and the demand draft to the respondents. The respondents effected clearance in the order of computerised booking priority. The customer got an allotment letter when his turn came. He contacted the dealer again and paid the balance price of the motor cycle by means of a demand draft which was again made out directly in the name of the respondents. The dealer transmitted the second demand draft also to the respondents. The respondents made out the clearance documents (gate pass/despatch advice/invoice) directly in the name of the customer, but sent the motor cycle to the dealer who had booked the order. The dealer gave delivery of the motor cycle to the customer after cleaning and pre-delivery inspection of the motor cycle. The dealer also helped the customer in registration and insurance. After delivery, the dealer gave after sale service to the customer. The learned representative of the department admitted that in this pattern of sale, which lasted for barely 3-4 months during the initial period, the property in the motor cycle was, no doubt, not passed on to the dealer and hence sale was to the customer from the public at large and not to the dealer.

3. The respondents have made a two-fold plea before us :-

(1) There was no wholesale sale of the motor cycles during this period. They sold the motor cycles in retail to individual consumers in the public. As such, Rule 6(a) of the Central Excise (Valuation) Rules, 1975 applied which is in the following terms :

"(a) where such goods are sold by the assessee in retail, the value shall be based on the retail price of such goods reduced by such amount as is necessary and reasonable in the opinion of the proper officer to arrive at the price at which the assessee would have sold such goods in the course of wholesale trade to a person other than a related person :

Provided that in determining the amount of reduction, due regard shall be had to the nature of excisable goods, the trade practice in that commodity and other relevant factors."

According to the respondents, the dealers' margin of Rs. 550/- per motor cycle, which was actually given by them to the dealers, ought to be deducted from the retail price charged from the customer in order to arrive at the deemed wholesale price as per Rule 6(a) above.

(2) Freight and insurance (Rs. 200/- per motor cycle) should also be deducted from sale price charged from the retail customer. They cited the Supreme Court judgment in the case of Bombay Tyre International (1983 ELT 1896 SC) according to which cost of transportation has to be deducted for arriving at the assessable value under Section 4.

4. The lea