Per Justice U.L. Bhat:

Appeal Nos. E/3705-3710/88-A have been filed by the common appellant, M/s Mahindra and Mahindra Ltd. (for short, MAHINDRA) against the common order dated 23.9.88 passed by the Collector of Central Excise, Bombay pursuant to six show cause notices in respect of different periods -

Appeal No. E/213/90-A has been filed by M/s Maruti Udyog Ltd. (for short, MARUTI) against the order dated 23.10.89 passed by the Collector of Central Excise, New Delhi. The particulars are as follows-

We have heard the appeals together since certain common questions arise for consideration.

2. MAHINDRA, engaged in the manufacture of Jeep vehicles has a network of dealers and sub-dealers appointed under agreements, to cater to the needs of different and allotted areas. They book orders and supply vehicles to customers who place orders, sell spares as authorised stockists, provide free after sales service and advertise as directed by MAHINDRA. MAHINDRA effect direct supply to Government Departments on rate contract. The dispute in the present appeals relates to sales to dealers. MAHINDRA has been declaring prices to dealers and on approval thereof paying central excise duty on assessable value determined accordingly. Dealers margin varied between Rs. 2500 to Rs. 3500 per vehicle, depending on the model and the margin was apparently high. Show cause notices were issued alleging that a part of dealers margin was intended to cover the cost of after sales service rendered and advertisement conducted as required under the terms of the agreement with the manufacturer, that assessable value under Section 4(1)(a) of the Central Excise Act, 1944 should include the cost of such after sales services and advertisement but the manufacturer did not include these elements in the assessable value for reckoning and paying duty and there was short payment in contravention of Section 4 of the Act with intent to evade duty. The notices propose demand of differential duty arrived at on addition of Rs. 1500 (out of the dealers' margin) to assessable value. MAHINDRA resisted the notices contending that they were vague, not valid and two earliest notices were barred by limitation and the larger period of limitation under the proviso to Section 11A of the Act has not been invoked, that there was no contravention of Section 4 of the Act, that the addenda issued to notices were invalid and served no lawful purpose, that the notices did not explain how Rs. 1500 has been arrived at, that the transactions with dealers were at arms length and on principal to principal basis, that the declared price was the "normal price", that no deduction was claimed on account of expenses of advertisement or after sales service, that there was no flow of additional consideration from dealers, that the expenses incurred by the dealers were on their own account and for their own benefit, and not as agents of MAHINDRA, that no part of dealers margin can be added to the assessable value unless they are related persons of the manufacturer which has not been suggested in the show cause notices, that the dealers' margin was not high as alleged and the terms of the agreements relating to dealers' obligation in the matter of advertisement and free after sales services were only a reflection of customary practice in automobile trade. The Collector overruled these contentions holding that the price charged by MAHINDRA was not the sole considerating and the money value equivalent to cost of services rendered by the dealers flowed back indirectly to MAHINDRA, that extra margin was allowed to cover cost of services required to be provided by the manufacturer and these