Tribunal excludes optional TV service charge from assessable value, grants relief to appellants

The Tribunal held that the annual service charge of Rs. 550 per Television set for the second and third year should not be included in the assessable value of the Television sets. The charge was deemed optional, not compulsory, supported by evidence showing that not all purchasers opted for it. The Tribunal emphasized that the service charge was for maintenance separate from initial sale, and any profit from it should not affect the assessable value. The appellants' appeals were allowed, and the department's appeal was rejected, granting consequential relief to the appellants.

---

---

Issues:
Whether the annual service charge of Rs. 550 per Television set for the second and third year should be included in the assessable value of the Television sets.

Analysis:
The case involved a dispute regarding the inclusion of an annual service charge of Rs. 550 per Television set for the second and third year in the assessable value of the Television sets. The appellants, a State Government undertaking, manufactured and sold Television sets leviable to Central Excise duty at different slab rates. The appellants provided a warranty for twelve months, during which they repaired the sets without extra charges. After the warranty period, they offered an optional annual service contract at Rs. 550 per set per year. The department alleged that the high service charge was a way to avail lower slab rates by keeping initial sale prices low. The lower authorities held that the service charge was part of the sale price and should be included in the assessable value.

The appellants contended that the service charge was not compulsory and was not recovered from all purchasers. Evidence was presented, showing that about 30% of retail customers did not opt for the service contract and hence did not pay the charge. The appellants issued debit notes to dealers, but not all were collected, and some customers even received refunds. The department argued that the service charge was compulsory, but the appellants explained that their defense was based on prevailing legal views at the time and denied the compulsory recovery allegation.

The Tribunal found that the service charge was optional, not compulsory, and the appellants had provided evidence to support this claim. The Tribunal also noted that the service charge was for maintenance activity separate from initial marketing, and any profit from this activity should not be included in the assessable value. Referring to relevant case laws, the Tribunal concluded that the service charge for the second and third year should not be included in the assessable value. The Tribunal allowed the appeals filed by the appellants and rejected the department's appeal, providing consequential relief to the appellants.

---