CESTAT Bangalore: Warranty charges included in assessable value.

The Appellate Tribunal CESTAT Bangalore upheld the inclusion of warranty charges in the assessable value under Section 4(3)(d) of the Central Excise Act, 1944. The appellant, a manufacturer of CNC Machine Systems, was ordered to pay the duty demanded within four weeks. Upon this payment, there would be a waiver of pre-deposit for the balance dues, and recovery pending the appeal decision would be stayed. The judgment was pronounced on 20-10-2010.

---

---

Issues:
1. Waiver of pre-deposit of amounts adjudged against the appellant in the impugned order.
2. Inclusion of warranty charges in the assessable value under Section 4(3)(d) of the Central Excise Act, 1944.

Issue 1: Waiver of Pre-deposit
The appellant, a manufacturer of CNC Machine Systems, sought waiver of pre-deposit of amounts adjudged against them in the impugned order. The dispute arose from the collection of fees for providing warranty, which were included in the selling price and Central Excise duty paid. The authorities issued a Show Cause Notice proposing a demand along with interest and penalty. The Assistant Commissioner confirmed the proposals, which were upheld by the Commissioner on appeal.

Issue 2: Inclusion of Warranty Charges in Assessable Value
The Tribunal noted that the appellant collected an amount for warranty against the sale of each machine, with a higher amount for international warranty. The appellant failed to pay duty on the additional amount collected for international warranty. The Tribunal referred to Section 4(3)(d) of the Central Excise Act, 1944, which defines "transaction value" to include amounts payable in connection with the sale. CBEC circular clarified that warranty charges form part of the assessable value, irrespective of whether the warranty is optional or mandatory. The Tribunal held that the international warranty charges were part of the assessable value, and duty was confirmed as payable by the appellant.

In conclusion, the Tribunal ordered the appellant to pay the duty demanded within four weeks and report compliance. Upon such pre-deposit, there would be a waiver of pre-deposit of the balance dues and a stay of recovery pending the decision in the appeal. The judgment was pronounced in open court on 20-10-2010 by the Members of the Appellate Tribunal CESTAT Bangalore.

---