By TIOL News Service

MUMBAI, AUG 27, 2015: THE appellant had entered into agreement with M/s ELCOT (A Govt. of Tamilnadu Enterprise) for supply of 14" CTVs during the period August 2006 to January 2009. The appellant had opted for payment of CE duty on MRP basis under the provisions of Section 4A of the CEA, 1944.

In the purchase order of ELCOT, it was indicated that unit price is inclusive of all accessories, taxes, duties and warranty charges, etc. However, the warranty charges of Rs. 75/- per TV will be paid to the supplier only after the end of 1st year and another Rs. 75/- at the end of 2 nd year. This unit price including the warranty charges is declared as MRP on all the package of TVs. However, while discharging the Excise duty liability, the appellant had worked out the assessable value as MRP minus warranty charges of Rs. 150/-.

A demand notice came to be issued on 25/2/2010 demanding differential excise duty of Rs. 3,87,14,771/-.

This demand was upheld by the CCE, Aurangabad along with imposition of equivalent penalty and interest.

We had reported the stay order as 2012-TIOL-330-CESTAT-MUM.

The appeal was heard on 01.04.2015 and the final order was passed recently.

Before the CESTAT, the appellant made exhaustive submissions and the same were equally rebutted by the AR who justified the order passed.

The Bench after noting that the ratio of the judgments cited by the appellant related to sales tax and income tax &cannot be borrowed in the present case observed -

+ From the reading of section 4A in subsection (2) it is very clear that while arriving at the assessable value for the retail sale price, an amount of abatement is specified by notification can only be deducted.

+ As per the definition of retail sale price when all the elements are includible in the RSP no any deduction can be allowed. The objective of allowing the abatement is that all the elements which do not form part of the assessable value should stand deducted by way of abatement. Therefore in the case where valuation is done under Section 4A, except abatement no further deduction is allowed.

+ In the definition of 'retail sale price', under the inclusion charge, warranty charges are not specifically mentioned but all the charges even though not specifically mentioned shall stand included in the retail sale price, therefore the deduction on account of warranty charges cannot be allowed from maximum retail sale price. In the definition after mentioning the specific charges it is also mentioned "and the like" this clearly shows that not only the charges explicitly mentioned in the definition are includible but also other like charges are also includible. It clearly means that all the charges are includible in the retail sale price at which the good is sold to the consumer.

+ If the contention of appellant is accepted regarding the deduction of warranty charges then likewise there are many more heads of charges which can also be claimed for deduction.

+ To avoid any such sort of interpretation, the legislature had enacted section 4A whereunder the valuation of consumer goods was made simplified, according to which, at whatever price the goods are sold to the consumer that price minus abatement as specified under the notification shall be the assessable value therefore there is no scope for any deduction other than abatement for the purpose of valuation under Section 4A.

+ Therefore, there is no provision under the law to exclude warranty charges from the retail sale price while computing the assessable value.

+ From the definition of Transaction value (s.4 of CEA, 1944) the warranty charges is also includible in the assessable value, this shows that legislators have clear intention that for the purpose of charging excise duty the warranty charges should be included in the assessable value.

+ If we compare the valuation under Section 4 and 4A it can be seen that all the charges which are includible as per Section 4 in the transaction value all such charges plus the element such as dealer margin, retail margin, sales tax freight, etc are also included in the retail sale price and thereafter the only deduction which is permissible is the abatement as notified by the government from time to time therefore there seems to be no reason why a particular element out of many charges i.e. warranty charges should be allowed to be deducted.

+ We do not agree with the submission of the appellant [that on the warranty charges they have discharged the service tax for this reason also the warranty charges should be allowed to be deducted from retail sale price of CTVs] for the reason that the statutory provision under Section 4A cannot be altered or influenced merely because the appellant has chosen to discharge service tax on portion of the retail sale price.

+ Therefore merely because the service tax was paid, deduction of the said value cannot be allowed as no such option has been provided either under the Central Excise Act, or under the Finance Act, 1994.

Limitation:

+ The appellant during a particular period were including warranty charges in the RSP and discharging the excise duty accordingly, but on their own they changed the system and started deducting warranty charges from the RSP, however, this was done knowingly by the appellant which was neither declared to the department nor any opinion was sought for from the department, this act of the appellant is clearly amounts to suppression of fact.

+ It is also observed that as per the price bid for the TV set to M/s. ELCOT the MRP shown is Rs.2197/- which includes the basic cost of Rs.1682, warranty charges of Rs.150, Excise duty of Rs.235.84 and freight and handling charges of Rs.130/-.

+ This shows that the appellant was in full knowledge that the excise duty was required to be paid on full MRP minus abatement but they paid less duty intentionally, therefore, this is clear case of suppression of fact and the appellant's submission that the demand being time barred is not tenable.

The order was sustained and the Appeals were dismissed.

In passing: Now, for the Revenue appeal, if any, in the matter of dropping of demand of Rs. 32,07,89,187/-…the show continues…

(See 2015-TIOL-1801-CESTAT-MUM)