1996 (7) TMI 497 - AT - Central Excise

Summary

Issues Involved:
1. Compulsory Maintenance Service (CMS) Charges
2. Assessable Value Inclusion
3. Extended Period of Limitation
4. Suppression of Facts and Mis-statement
5. Penalty Imposition

Detailed Analysis:

1. Compulsory Maintenance Service (CMS) Charges:
The appellants, M/s. STC, were engaged in the manufacture of television sets, which were sold through appointed wholesale dealers (WDs). The sale price was realized through two separate bills: one for the price of the goods and another for CMS charges. The CMS charges, although shown as optional, were found to be compulsory and were collected simultaneously with the price of the goods. The CMS charges were not included in the declared assessable values, and no Central Excise Duty (CED) was paid on them. The investigation revealed no agreement between STC and the ultimate customers, and the CMS charges were a compulsory payment by the WDs, which were then passed on to the ultimate customers. The scheme was considered a camouflage to evade substantial amounts of CED.

2. Assessable Value Inclusion:
The principle of including after-sale service charges in the assessable value was laid down by the Hon'ble Supreme Court in the case of U.O.I. v. Bombay Tyre International - 1983 (14) E.L.T. 1896 (S.C.), which stated that expenses contributing to the value of the article up to the date of sale, including after-sale service charges, are liable to be included. The CMS charges for after-sale services during the free guarantee period were considered additional consideration for the sale of the TV sets and thus includible in the assessable value. The case of Collector of Central Excise v. Kelvinator of India Ltd. - 1988 (36) E.L.T. 517 (S.C.) was distinguished as it involved an optional service contract beyond the warranty period, unlike the compulsory CMS charges in the present case.

3. Extended Period of Limitation:
The appellants contended that the demands were barred by time, arguing that the Department was aware of the extra collections and there was no suppression. However, the facts revealed that the CMS charges were not disclosed in the price lists, gate passes, or RT-12 returns, and were collected separately by separate invoices. The extended period of limitation was invoked due to the suppression of facts, which was discovered through scrutiny of records and investigations.

4. Suppression of Facts and Mis-statement:
The appellants had not disclosed the CMS charges in their price lists and sought approval only for the declared amounts, excluding the CMS charges. The show cause notices alleged wilful mis-statement and suppression of facts with the intent to evade CED. The adjudicating authority confirmed these allegations, noting that the appellants had mis-declared the prices of TV sets and suppressed the fact of CMS charges collection.

5. Penalty Imposition:
The duty evaded was Rs. 21,90,190.75, and a penalty of Rs. 10,000/- was imposed. The penalty was deemed reasonable considering the facts and circumstances of the case. The appeals were rejected, and the impugned orders were confirmed.

Conclusion:
Both appeals were dismissed, confirming the inclusion of CMS charges in the assessable value, the invocation of the extended period of limitation due to suppression of facts, and the imposition of penalties for evasion of CED. The judgment reinforced the principle that after-sale service charges are part of the assessable value for determining CED liability.