Tribunal orders Maruti Suzuki to pay Rs 150 crore in additional excise duty

Written by Subhomoy Bhattacharjee | New Delhi | Updated: Oct 18 2014, 13:53pm hrs
Maruti SuzukiMaruti Suzuki taxation case relates to the taxation of festival discounts that dealers of car companies offer to boost sales.
Maruti Suzuki India has been asked to pay an additional excise duty of Rs 150 crore by a tax tribunal on Friday.

The company has been given time till December 2014 to pay up the dues or face the possible levy of interest and penalty that could take the total upward of Rs 800 crore. Maruti, however, has the right to contest the ruling before the Delhi High Court.

The case relates to the taxation of festival discounts that dealers of car companies offer to boost sales.

According to the Customs Excise and Service Tax Appellate Tribunal (CESTAT), Maruti dealers run customer promotion schemes including offering of discounts.

These schemes or promotional expenses, according to the tribunal are adjusted by the company from the dealers through the margins offered on the automobiles to them.

In response to queries from The Indian Express Maruti claimed the order from the bench was an interim one and hence they would not want to comment on it.

Maruti had argued before the bench that it had nothing to do with these promotional schemes which were post removal expenses as the cars were sold to the dealers at the factory gates. But the tribunal has not accepted it. Instead it has held that since the dealers and Maruti enter into written agreements under which the former promise to conduct such road shows, these are taxable as part of the cost of the cars sold by the company.

In other words Maruti was producing cars at a higher price than it was claiming in its excise returns to the government. The tax tribunal has levied the Rs 150 crore as the excise duty the company ought to have paid the government over the past five years.

The dealers, in turn often recovered the costs of these campaigns from the buyers of cars through several heads in the eventual pricing. The most common of these are termed handling charges. In several cases in the past two years the courts have frowned on the levy of such charges.

The case had been running for quite some time in the tribunal. But in todays conditional stay order the bench directed Maruti to deposit the sum out of a total demand of almost Rs 800 crore of excise duty, interest of duty and penalty (by December 14). If Maruti pays up the directed amount by the stipulated date, recovery of balance excise duty, interest and penalty shall be stayed until the final disposal of the appeal.

FESTIVAL SCHEMES

* The case relates to the taxation of festival discounts that dealers of car companies offer to boost sales.

* According to the Customs Excise and Service Tax Appellate Tribunal (CESTAT), these schemes or promotional expenses are adjusted by the company from the dealers through the margins offered on cars sold

* The tribunal has held that these expenses are taxable as part of the cost of the cars sold

* The tribunal has levied Rs 150 crore as excise duty the company ought to have paid in five years