The tax tribunal found Maruti Suzuki guilty of producing the cars at a higher amount than it claimed in its excise returns, thereby evading taxes of Rs. 150 crores in past 5 years.
The Customs Excise and Service Tax Appellate Tribunal (CESTAT) found Maruti Suzuki guilty of evading taxes and has imposed an additional excise duty of Rs. 150 crores liable to be paid before December, 2014 out of the total demand of almost Rs. 800 crore. Running for quite some time now, the case was in regard to the promotional schemes and discounts car dealers run during the festive season. The tax tribunal stated that these schemes and promotional discounts are adjusted by the company from dealers in margins offered to them on the automobiles sold.
Maruti Suzuki in its defence stated that it had nothing to do with the promotional schemes and discounts which are termed as ‘post removal expenses’ and are run by dealers at their cost. The automaker states to have sold these cars at factory rates to the dealers. Not buying Maruti’s explanation, the tax tribunal stated that since the dealers and company enter into a written agreement under which the dealers have to conduct the promotional schemes and offers to amplify sales, these are taxable as part of the cost of cars sold by the company.
In simpler terms, Maruti has been accused of selling cars at a higher price than the amount shown on its excise returns, thereby evading taxes. Keeping up with this strategy, the tax tribunal found the auto giant guilty of paying the excise duty to the tune of Rs. 150 crore that it should have paid over the last 5 years. If Maruti pays the directed Rs. 150 crores before December this year, the recovery of the balance excise duty with interest and penalty will be put on hold until the disposal of the appeal.
The tax tribunal further stated that in order to recover the cost for the free goodies, discounts and promotional schemes, dealers add several overhead charges like depot charges or handling charges to the final price of the vehicle that is eventually extorted from the customer. However, this sum goes unaccounted for and is a direct benefit to the dealer. Maruti Suzuki can appeal in front of the Delhi High Court challenging the tax tribunal’s order.
Source – Financial Express