2004 (5) TMI 350 - AT - Central Excise

Summary

Issues:
Whether separately recovered warranty charge is includable in the assessable value of the refrigerator.

Analysis:
The case involved the issue of whether a separately recovered warranty charge should be included in the assessable value of a refrigerator. The appellant, a manufacturer of refrigerators, sold refrigerators with a one-year warranty included in the price, but offered an additional four-year warranty for a separate payment of Rs. 175 - 200 per refrigerator. The authority held that the additional payment for the four-year warranty should be part of the assessable value based on the majority of buyers opting for it. However, the appellant contended that the terms of the written warranty document should govern the transaction, citing the finality of written contracts as per legal precedent.

The learned Counsel for the appellant argued that previous decisions by the Tribunal and the Apex Court favored the appellant's position, emphasizing that the cost of the additional warranty should not be part of the assessable value. They referred to specific legal cases supporting their stance. The Tribunal examined the records and submissions from both parties, reaffirming that the terms of a written contract are binding. In this case, the warranty agreement clearly provided for an optional additional four-year warranty with separate payment, making it distinct from the sale of the refrigerator. The Tribunal noted instances where buyers did not opt for the additional warranty, further supporting the optional nature of the arrangement.

The Tribunal highlighted that previous decisions by both the Tribunal and the Apex Court had established that the additional warranty was a separate arrangement between the parties and should not be considered part of the normal value of the refrigerator. The value of the separate warranty transaction should not be included in the initial sale and purchase transaction. Consequently, the duty demand made in the impugned order was deemed contrary to established law on the valuation of the refrigerator. Therefore, the impugned order was set aside, and the appeal was allowed. Additionally, the Tribunal directed the return of the deposit made by the appellant towards the additional duty liability during the investigation, as the issue was decided in favor of the appellant.