9911796707
TMI Blog2018 (9) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... . The present dispute revolves around the contract entered into between the appellant and State Bank of India and their associates. As per the agreement entered into by the appellant with the banks, the latter were required to make payment for warranty services half-yearly in arrears, the price of which was not included in the price of the ATM and was required to be paid separately by the banks. 2.2 Further, after expiry of the warranty service period of two years, the banks were required to make payments to the appellant towards "Second Line Maintenance" (annual maintenance contract) for three years. The Department took the view that the said charges, though being recovered separately, are required to be included in the assessable value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rranty period of two years and three years which are optional only and therefore, the price of the ATM is independent of warranty services of two years and three years. (ii) The appellant pays service tax for the rate of warranty charges accepted for two years and three years. It may also be seen that the warranty charges quoted are per annum and it does not depend on the price of the ATM. (iii) The price payable by the buyer on a product shall include only services which are in connection with the sale. It is submitted that the disputed warranty services cannot be considered as in connection with the sale for the following reasons : (iv) If the service is part of sale consideration it need not be quoted separately. (v) The rates qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be broadly summarized as under : (i) The warranty charges are not "optional charges" as made out by the appellants; (ii) For each of the items supplied by appellant, the "Master Solutions Agreement" provides for separate charges for warranty/second line maintenance which shall be undertaken by the appellant for the period of five years cumulatively from the date of installation of the ATMs. Hence, the warranty/second line maintenance agreed to be provided by appellant is compulsorily connected with the supply of ATMs. (iii) Instead of paying Central Excise Duty at around 16%, the noticee has chosen to discharge much lesser tax amount at around 8% on the pretext of paying service tax. 6. Heard both sides and have gone through the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction value become the assessable value for levy of Central Excise Duty. 9. Viewed in this light, we would then focus on the conditions of the sale. Para 5.2 of the Master Solutions Agreement which has been reproduced by the appellant in para 7 of the grounds of appeal is reproduced as under : "5.2 Warranty period The warranty services commence upon installation (irrespective of whether connectivity to SBI's ATM switch has been obtained or not) and shall be for a period of two years. However, the price of warranty services is not included in the price of the products and is payable separately by SBI as per agreed rates in addendum A. After the expiry of the warranty service period of two years, second line maintenance (annual ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant will provide to the bank and specifically indicates that they shall be provided as "SLM/warranty services" during the warranty period of two years and as SLM/maintenance service after expiry of the warranty period. 13. From the discussions hereinabove, it is clearly evident that it is mandatory for the buyers of the ATMs to also accept the warranty agreement referred to above and pay warranty charges for the first two years and second line maintenance charges for the next three. Although the amounts become payable only later, in our view, this would still come within the scope of the definition of the type of warranty charges that would be required to be incorporated into "transaction value" for the purposes of Section 4(3)(d) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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