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2015 (9) TMI 517 - CESTAT MUMBAI

2015 (9) TMI 517 - CESTAT MUMBAI - 2016 (335) E.L.T. 778 (Tri. - Mumbai) - Duty demand - Valuation - Whether warranty charges can be allowed to be deducted from the MRP for the purpose of valuation under Section 4A - Held that:- 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. In the present case, on CTVs the abatement during the relevan .....

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ludes, local or other taxes, freight, transportation charges, commission payable to dealer and all charges towards advertisement, delivery, packaging, forwarding and the like. - Price which affixed on the package of CTVs is undisputedly maximum retail sale price and no deduction can be allowed from the said retail sale price other than the abatement as statutorily provided under the notification. In the instant case, the fact is that the RSP was declared by the appellant including the warra .....

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sable value. - 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. - Appellant during to a particular period were including warranty charges in the RSP and discharging th .....

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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 bar is not tenable. - Decided against assessee. - Appeal No. E/289 & 1165/11-MUM - Dated:- 31-7-2015 - P. K. Jain, Member (T) And Ramesh Nair, Member (J), JJ. For the Appellant : Shri V Sridharan, Sr. Adv. and Shri Gajendra Jain, Ad .....

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al Excise Tariff Act, 1985. The appellant had entered into agreement with M/s ELCOT (A Govt. of Tamilnadu Enterprises) for supply of 14" CTVs during the period August 2006 to January 2009. The appellant had opted for payment of Central Excise duty on MRP basis under the provisions of Section 4A of the Central Excise Act, 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 charg .....

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y of ₹ 3,87,14,771/- under the provisions of proviso to Section 11A(1) of Central Excise Act, 1944 alongwith interest thereon under Section 11AB ibid. The notice also proposed to impose penalty on the appellant under the provisions of Section 11AC of the Central Excise Act read with Rule 25 of the Central Excise Rules, 1944. The said notice was adjudicated by the Commissioner of Central Excise, Aurangabad vide the impugned order and the Ld. Commissioner passed following order: (i) The valu .....

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Ltd., 14 KM Stone, Paithan Road, Aurangabad and also the related proposal to levy interest under Sec. 11AB and to impose penalty under Section 11AC, cannot be sustained and, will have to be dropped, which I hereby do. (ii) (a) No deductions other than the notified abatement is allowed from the MRP to arrive at the assessable value under Section 4A. (b) Warranty charges have been incorrectly deducted by the assesse from MRP for arriving at assessable value under Section 4A of the Central Excise .....

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1). (d) I confirm the recovery of interest, at the appropriate rates, on the amount of ₹ 3,87,14,771/- determined and confirmed at ii(b) above, from the assesse M/s. Videocon Industries Ltd. 14 KM Stone, Paithan Road, Aurangabad, under Section 11AB of Central Excise Act, 1944. (e) I impose a penalty of ₹ 3,87,14,771/- on the assesse, M/s. Videocon Industries Ltd. 14 KM stone, Paithan Road, Aurangabad under Section 11AC of Central Excise Act,1944. Aggrieved by the aforesaid impugned o .....

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ot satisfactorily fulfilled by the Appellants, the Purchaser has right to terminate the warranty maintenance contract and claim damage for non-fulfilment of warranty contract. It is a case where the prices of CTVs remain unaltered even if warranty services are not satisfactory rendered by the appellants. In other words, the supply of warranty service is not a covenant for supply of CTV. (d) The Purchase Order has been divided in two parts, first part is a price for purchase/supply of CTVs and se .....

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e end of first year, second year and third year also go to show that obligation under contract for warranty service is separate obligation. The consideration for warranty is separate and received after the obligation is fulfilled. In view of the above, there are two separate contracts one for supply of CTVs and other for supply of warranty services. (f) If there is one consolidated price for two distinct supplies, then the consolidated price needs to be apportioned over the two supplies. It is w .....

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oothpaste and toothbrush for a consolidated MRP. There are no violation under Weight and Measurement Act. Further, for ease suppose, toothbrush and toothpaste are liable to be duty on MRP basis and the rate of abatement is same. In this simple case, there is no need for apportionment since there is no tax implication. Apportionment would become necessary in cases where one product is to be valued under Section 4 and other product is valued under Section 4A, where one product is traded and other .....

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on Dunkerly [1958 (9) STC 353 (SC)] (iv) State of Gujarat vs. Elecon Engg Co. [1993 (900 STC 74 (Guj)] (v) State of Tamil Nadu vs Titanium Equipemnts & Anode [1998(110) STC 43 (Mad)] In view of the above, the principle of apportionment needs to be applied and the consolidated price needs to be disintegrated to arrive at the value of CTV and warranty services. So done, the demand of excise duty on warranty services would not survive. (h) A plain reading of the definition of "retail sale .....

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e ultimate consumer. This is so because the aforesaid elements are integral convenants of sale of goods. (i) Specific mention in the inclusive portion of the definition is not decisive. Suppose certain charges are incurred for transporting the goods form dealer place to the consumer's place and for this activity, the dealer charges separately to the consumer over the above the retail sale price. It is nobody's case that this amount charged by the dealer should form part of retail sale pr .....

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and hence, Explanation 1 to Section 4A does not cover the warranty services provided by the appellants. (j) In the present case, service tax and excise duty cannot be levied simultaneously on the same value. Warranty is a supply of service and the appellants have paid service tax on the consideration received towards warranty services. It is submitted that services cannot taxed under the Central Excise Act, 1944. Hence the department cannot be demand excise duty on the warranty services rendered .....

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lectricals vs. CCE [2009(14) STR 737 (KER)] (k) The appellant submits that they are correctly liable to pay service tax on warranty services which stands discharged. In view of the aforesaid judgments, the demand of excise duty on the said warranty services is incorrect. The impugned order-in-original are therefore liable to be set aside. (l) The Ld. Departmental Authorised Representative argued that excise duty as well as Service tax both can be levied simultaneously. Ld. D.R. in this context r .....

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not satisfactorily perform warranty services, the customer is not liable to pay the amount charged towards warranty but the customer is liable to pay consideration towards sale price of CTVs. Hence, the argument of the department that warranty is includible in assessable value is baseless and incorrect. The appellant have paid service tax on value on which there is demand of excise duty. The rate of service tax was always on the higher side during the period under consideration. The amount of se .....

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onclusion is reached, then it would be clear that service tax has been wrongly paid and therefore the amount already paid as service tax should be adjusted towards the excise duty liability. The rate of service tax was always on the higher side during the period under consideration. The amount of service tax paid/payable is also more than the demand of excise duty. This contention as raised by the appellants before the adjudicating authority and there is no rebuttal as far these. The relief elig .....

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redit on Tool Kits is not available to the assessee, however, the assesse cannot be asked to pay the entire credit amount without adjusting the duty paid on Tool Kit while clearing the vehicles from the factory. Hence the adjustment of duty with the credit was duly allowed by the CESTAT. (o) In sales tax law, a dispute which often arises for consideration of the courts is that where an assesse has paid sales tax in one state, say Maharashtra, whereas the court come to conclusion that the same wa .....

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t Heavy Electrical Ltd. vs. UOI [1996 4 SCC 230] The aforesaid judgments, the Hon'ble Supreme Court has held that States should adjust the amount of tax collected by them if one State has wrongly collected tax due to other state. In the present case, the adjustment is to be done within the same Commissionerate. In other words, the adjustment of service tax paid with excise duty demand within the same jurisdictional commissionerate should be allowed in view of the aforesaid judgments of Supre .....

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t warranty contract is not a separate contract. Whereas, in the present case, as already submitted supra, warranty contract is a separate contract. Further, the Cestat did not have occasion to consider the effect of the case laws cited above. (q) The demand in the present case for the period December 2007 to January 2010 is beyond the normal period of limitation. The appellant submit that they have paid service tax on warranty charges and rate of service tax during the relevant period was higher .....

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legation that any particular information, which was required to be submitted in the return, was not submitted. The information which was not required to be submitted in law and therefore not submitted cannot be treated as suppression. In any case, there is no particular column in the ER-1 return to show the method of determination of assessable value adopted by the assessee. Therefore deficiency in the prescribed format of form will not amount to non-disclosure on the part of the notices and the .....

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appellants subsequently realised that warranty charges are liable to service tax and not liable to excise duty. Therefore, the appellants had started paying service tax and stopped paying excise duty on the same. There is no requirement in law to intimate to department about the aforesaid corrective measure taken by the appellant. The information which was not required to be submitted in law and therefore not submitted cannot be treated as suppression. Hence, the allegation of suppression on the .....

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esaid submissions and therefore the imposition of penalty is also liable to be set aside. The issue involved in the present case is purely interpretation of the contract and the legal provisions. It is well settled that imposition of penalty is not sustainable in the cases where issue relates to interpretation of legal provisions and contract. Interest is also not payable when the demand of duty is not maintainable in view of the submissions made in the aforesaid paragraphs. 4. On the other hand .....

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ce tax on the same transaction. The system of taxation in India is that there many taxes like Central Excise duty, service tax, Sales tax, Octroi, purchase tax etc and many of them are levied on the same goods. There is no bar that once a particular tax has been levied, no other taxes can be levied on the same goods. Just because Central Excise duty and service tax are being administered by the same department, it cannot be said that both cannot be simultaneously levied when no such stipulation .....

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ese components. It is noteworthy that warranty is specifically included for payment of excise duty which is under consideration in this case. 4.1 There is no dispute that television sets are mentioned in notification and are also required under the provisions of Standard of Weight and Measures Act, 1976 for declaring retail sale price. There is also no dispute that television sets are liable to Excise duty under Section 4A of the Act on the Basis of retail sale price. As per sub section 1 of Sec .....

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pellant. It is noteworthy that the final consumer or their purchaser ELCOT does not have the option to buy only TV set and to not take the warranty. Also TV set with warranty was required to be given by one supplier and there was no provision that TV set should be provided by one supplier and warranty given by another person. 4.2 As per the definition of retail sale price as mentioned above, it includes freight, transport charges, commission payable to dealers and all charges towards advertiseme .....

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"and the like". 4.3 Under section 4A, the retail sale price is the maximum price at which the goods may be sold. It is not the actual sale price of goods which will be different in most of the cases. Thus, if the assessee is recovering ₹ 150/- after one or two years, it does not help the assessee and the concept of retail sale price will apply. Ld. A.R. relied on following case laws in this regard: (i) Hindustan Coca-Cola Beverage P. Ltd. Vs. CCE [2006 (199) ELT 718 (Tri-Del)] ( .....

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he department was asking for excise duty and service tax separately. As there was no other activity involved, the Tribunal held that both cannot be charged. In the present case, the component of warranty of ₹ 150/- is very small part of the goods worth ₹ 2197/- and hence the case law is not applicable. The appellant also refers to Osnar chemicals Pvt Ltd. Vs. CCE (Supra), in this case, the assesse was carrying out mechanical mixing of Bitumen with other additives at site which is use .....

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e duty and service tax cannot be charged on the same activity of job work and it was so correctly held by Tribunal and upheld by High Court. This case law is not applicable to the present case as there is no job work involved. Regarding the case law relied upon by assessee of Transformers and Electricals Kerala Vs. CCE (supra), He submits that the said case law pertain to payment of service tax on design and engineering, erection and installation under Consulting Engineer Service and is not rele .....

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to duty on the basis of retail sale price. The assessee were recovering optional service charges and rust proof protection charges collected over and above the MRP. The appellant was issuing two different invoices to their dealers-one for the sale of the refrigerator/washing machines and another for OSC/RPP. However, the dealer were issuing a composite invoice to customer for sale price plus OSC/RPP. Also, if a Customer did not want to opt for OSC/RPP, the customer would file a refund claim for .....

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uctions under Section 4A. Since Assessee was paying excise duty on warranty charges earlier, they should have approached the Department for clarification or at least intimated the department. However, the assessee chose not to do that and took a wrong deduction with intention to evade payment of duty. Thus, extended period is invokable in this case. 5. We have carefully considered the submission made by both sides and perused the record. 6. The issue to be decided by us is whether warranty charg .....

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Since the valuation is governed by Section 4A it is necessary to read the said Section to ascertain what are all elements liable to be included in the maximum retail price. The section 4A is therefore reproduced below: SECTION [4A. Valuation of excisable goods with reference to retail sale price. (1) The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 ( .....

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unt of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette. (3) The Central Government may, for the purpose of allowing any abatement under sub-section (2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods. [(4) Where any goods specified under sub-section (1) are excisable goods and the manufacturer - (a) removes such goods from the place of manufacture, without declarin .....

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n the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section. Explanation 1. - For the purposes of this section, "retail sale price" means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the pr .....

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to be the retail sale price; (b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price; (c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price fo .....

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1/3/2006 as amended from time to time. From the subsection (2) is can be seen that except notified abatement no other deduction such as warranty or any other charges are allowed to be deducted. It is also seen from explanation 1 under subsection (4) of section 4A that as per the definition of retail sale price, the price at which the goods is sold in packaged form to the ultimate consumer which includes, local or other taxes, freight, transportation charges, commission payable to dealer and all .....

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lements are includible in the RSP no any deduction can be allowed. The objective of allowing the abatement is that all the elements which not to 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 sp .....

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e 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 notifica .....

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s and the same was affixed on the package. Thus as per the appellant's declaration itself the retail sale price includes the warranty charges. It that is so the abatement ranging from 30% to 35% as notified by the government shall only be allowed and in term of subsection (2) of section 4A no any other deduction is permissible to arrive at the assessable value. Therefore there is no provision under the law to exclude warranty charges from the retail sale price while computing the assessable .....

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rovision for the purpose of valuation of goods for charging excise duty and as per Section 4A no apportioning of different charges was provided, therefore the ratio of the judgments related to sales tax and income tax cannot be borrowed in the present case. We find that the even as per Section 4 of Central Excise Act, 1944 the transaction value amongst other charges includes warranty charges also In this Regard it is pertinent to go through the definition of transaction value as provided under S .....

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ling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.] From the above definition of Transaction value 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 asse .....

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rges i.e. warranty charges should be allowed to be deducted. The appellant submitted 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. We do not agree with this submission of the appellant 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 .....

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