18 April 2014
A car is booked with Ford dealer with token amount of Rs. 50000 on 02-02-14. At that time ex-showroom price is Rs. 8.28 lakhs. Subsequently in interim budget GOI reduced Excise duty from 12% to 8% for this car category. Now revised ex-showroom given is Rs. 8.22 lakhs i.e. reduction of Rs. 6000 only. My query is, assuming Assessable Value of car at Mfr's factory gate @ say Rs. 6 lakhs the Excise reduction of 4% comes to Rs. 24000. Should this benefit not be passed to final consumer (customer) and whether not passing of same tantamounts to "Unjust Enrichment" by the Mfr Ford Motors? Will be grateful for clarification of my doubt. Thanks in anticipation.
18 July 2024
Your query pertains to the reduction in excise duty on cars and whether the benefit of this reduction should be passed on to the final consumer by the manufacturer (Ford Motors) under the concept of "Unjust Enrichment." Here's a detailed explanation:
### Excise Duty Reduction and Assessable Value:
1. **Reduction in Excise Duty:** - The Government of India reduced the excise duty from 12% to 8% for the category of cars to which your Ford car belongs.
2. **Impact on Ex-Showroom Price:** - Initially, the ex-showroom price of the car was Rs. 8.28 lakhs, and after the reduction in excise duty, it was revised to Rs. 8.22 lakhs, resulting in a reduction of Rs. 6,000.
3. **Assessable Value and Excise Benefit:** - You mentioned the assessable value of the car at the manufacturer's factory gate is Rs. 6 lakhs. The excise reduction from 12% to 8% on an assessable value of Rs. 6 lakhs would indeed result in a lower excise duty payable by the manufacturer.
- Calculation: - Initial excise duty at 12% on Rs. 6 lakhs = Rs. 72,000 - Revised excise duty at 8% on Rs. 6 lakhs = Rs. 48,000 - Benefit due to excise reduction = Rs. 72,000 - Rs. 48,000 = Rs. 24,000
### Passing on Benefits to Consumers:
- **Concept of Unjust Enrichment:** - Unjust enrichment refers to the principle that if a benefit (like reduction in taxes) is intended for a specific party (in this case, consumers due to reduced excise duty), it should not be retained unjustly by another party (manufacturers).
- **Legal Requirement:** - As per Indian tax laws and guidelines, manufacturers are generally required to pass on the benefit of reduced taxes (such as excise duty) to consumers by way of lower prices.
- **Compliance and Consumer Rights:** - Failure to pass on such benefits can lead to legal implications, including consumer complaints and regulatory actions. The Competition Commission of India (CCI) and other consumer protection bodies oversee such matters to ensure fair pricing practices.
### Conclusion:
In your case, since the excise duty reduction on the assessable value of the car at the manufacturer's gate results in a benefit of Rs. 24,000, this benefit ideally should be reflected in the pricing of the car for the final consumer. Manufacturers like Ford Motors are expected to adjust their pricing to pass on such benefits to consumers promptly. Failure to do so could indeed be construed as unjust enrichment, where the manufacturer retains an undue benefit intended for consumers.
If you believe that the benefit has not been passed on to you as a consumer, you may consider raising this issue with Ford Motors directly or seeking guidance from consumer protection authorities to ensure compliance with pricing regulations and consumer rights.
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