Automobiles and consumer durable goods may cost a little more with tax authorities clarifying that after-sales services and pre-delivery inspection charges would be included in the assessable value of these goods. Manufacturers would now have to pay excise duty on the ex-factory price, including the value of such services provided during the warranty period. After-sales services usually refer to free servicing of vehicles and maintenance of consumer durables which are built into the commission paid to dealers.

The Central Board of Excise and Customs (CBEC) has said since these services are provided free by the dealer on behalf of the manufacturer (or assessee) and is one of the considerations for sale of the goods, they should be included in the total cost of the good, just as advertisement and publicity charges are included.

Accordingly, the board has directed field formations to continue issuing showcause notices demanding excise duty on the value of these activities. However, there is a slight reprieve for manufacturers as there is a case of Grasim Industries pending with the Supreme Court. The CBEC will wait for the final decision of the apex court, and till then the showcause notices would be referred to its call book, implying that they would not be actively pursued.

The question whether after sales and pre-delivery inspection charges would be included in the assessable value had arisen at a recent meeting of CBEC chief commissioners at Shillong. Field officials have been confused on how to treat these services because of differing decisions by tribunals, even though the board had clarified the issue way back in 2002.

For instance in 2004, in the case of Maruti Udyog versus the Commissioner of Central Excise (Delhi), the tribunal held that these charges could not be included in the assessable value as they do not accrue to the manufacturer. However, in another recent case against the carmaker filed in 2009, the tribunal had doubted its earlier judgment and referred the matter to a larger bench.

Analysts said the move would not be very positive for auto makers and manufacturers of consumer durables, who are just beginning to recover from the economic slowdown. ?There could be just a marginal hike in prices of these goods. But more importantly, there could be a demand for the past period as well, which would cumulatively be a significant amount,? pointed out Pratik Jain, executive director, KPMG.

?The earlier tribunal decision seems logical. Now there will be uncertainty over the issue until the Larger Bench decides on it. The Supreme Court decision is in a different context and may not be directly related,? he added.