Honda's discounting exercise has resulted in a Rs. 164 crore excise duty claim by the Central Board of Excise & Customs (CBEC).

The demand has been made as a result of Honda having paid duties on the discounted price for the Jazz (now discontinued) & Brio (to a lesser extent).

The CBEC is demanding that the excise duty has to be paid on the production cost of the cars, and not on discounted rates at the time of sale. A show cause notice has been issued to Honda for payment of the additional excise duty.

Honda had earlier slashed prices of the Jazz towards the second half of 2011 by Rs 1.6 Lakh, in an effort to try increasing sales to 1,000 units a month (they had slid to 250 units / month by then). The Jazz never really recovered from its initial pricing fiasco though.

The Supreme Court had ruled against Fiat India in a judgement earlier last year, directing Fiat to pay Rs 400 crore in excise duty. In this case, Fiat had imported CKD kits (between 1996 and 2001) of the Uno hatchback and sold them below cost price (paying lower taxes as a result). It was found that the cost of production was much less than the wholesale price declared by Fiat, and hence it was liable to pay the amount claimed by the authorities.

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