Warranty replacement parts cleared free of cost: credit reversal held sufficient, with no duty revaluation from warehouse sale price.

On clearance of duty-paid parts free of charge to meet warranty obligations, reversal of the credit already taken was treated as sufficient compliance under Rule 57AB(1C). The attempt to determine duty by reference to the value of similar goods sold from the warehouse was rejected because those warehouse sales concerned spare parts sold for a different purpose and at a different commercial stage. A prior decision involving goods actually resold by a sister concern was held factually distinct and inapplicable. The demand based on re-determination of value was therefore set aside, and the assessee's position was accepted.

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Issues: Whether, on clearance of duty-paid parts free of charge to meet warranty obligations, reversal of the credit taken is sufficient compliance or duty is payable on the value of similar goods sold from the warehouse under Rule 57AB(1C) of the Central Excise Rules, 1944.

Analysis: The goods cleared from the factory were supplied free of cost only to satisfy warranty commitments and were neither sold nor resold. The comparison with warehouse sales was rejected because those sales were of spare parts for a different purpose and at a different commercial stage. The earlier decision dealing with goods actually resold by a sister concern was held to be factually distinct and inapplicable. Following the Larger Bench view in the identical situation, reversal of the credit already taken was treated as sufficient and no fresh valuation based on warehouse sale price was required.

Conclusion: Reversal of credit was held sufficient, and the demand based on re-determination of value was set aside in favour of the assessee.

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