1987 (5) TMI 273 - AT - Central Excise

Inclusion of After-Sale Servicing Costs in Assessable Value Upheld with Limitation on Time-Barred Demands

The Tribunal majority upheld the inclusion of after-sale servicing and repairing expenses beyond the warranty period in the assessable value, citing ... Valuation Issues Involved:1. Inclusion of after-sale servicing and repairing expenses beyond the warranty period in the assessable value.2. Time-barred nature of the demands.3. Inclusion of installation and transportation charges in the assessable value.Detailed Analysis:1. Inclusion of After-Sale Servicing and Repairing Expenses Beyond the Warranty Period in the Assessable Value:The primary issue revolves around whether the expenses incurred for after-sale servicing and repairing beyond the warranty period should be included in the assessable value of the goods. The appellants argued that these charges were optional for customers and unrelated to the production or manufacture of excisable goods, thus should not be included in the assessable value. They claimed that including these charges would violate Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by the authority of law.The department countered that these charges were loaded onto the value of the goods at the time of clearance from the factory, irrespective of whether the customer would opt for the after-sale services. They argued that these charges enhance the marketability of the product and should be included in the assessable value, citing the Supreme Court's ruling in the Bombay Tyre International case, which stated that expenses promoting marketability should be included in the assessable value.The Tribunal upheld the department's view, stating there was no law distinguishing charges for maintenance during and after the warranty period. It concluded that all such charges enhance the marketability of the product and should be included in the assessable value. The Tribunal found the appellants' attempt to exclude these charges as a device to escape duty.However, a dissenting opinion by one of the members argued that after-sale services beyond the warranty period were optional and should not be included in the assessable value. This view was supported by a previous Tribunal decision in the Konark Television case, which held that optional service charges for periods beyond the initial warranty should not be included in the assessable value.2. Time-Barred Nature of the Demands:The appellants contended that the demands were time-barred, as demands for duty can only run for six months unless there is evidence of fraud or suppression of facts. The Assistant Collector did not treat the loss of duty as due to suppression of facts or fraudulent practices and did not impose any penalties, indicating no fraud or deception by the assessee.The Tribunal agreed with the appellants, stating that in the absence of any findings of fraud or suppression, the demands must be limited to six months. The appeal was rejected, but the department was directed to recover duty only within six months of the demands.3. Inclusion of Installation and Transportation Charges in the Assessable Value:The appellants argued that installation charges were for setting up the antenna and not for the TV set itself, and thus should not be included in the assessable value. The department maintained that there were no documents to prove this claim, and the charges appeared to be part of the overall sales price.The Tribunal found no confidence in the appellants' claims regarding the extra charges and upheld the inclusion of these charges in the assessable value. However, it allowed for the possibility of deducting transportation charges if the appellants could prove that these were actual charges for specific goods incurred beyond the factory gate.Conclusion:- After-Sale Servicing and Repairing Expenses Beyond Warranty Period: Majority of the Tribunal upheld their inclusion in the assessable value, while a dissenting opinion argued against it.- Time-Barred Nature of Demands: The Tribunal agreed that demands should be limited to six months in the absence of fraud or suppression.- Installation and Transportation Charges: The Tribunal upheld the inclusion of installation charges but allowed for potential deduction of transportation charges if adequately proven.The appeal was partly allowed, with specific directions for recalculating and refunding any excess amounts collected.