2011 (3) TMI 1341 - AT - Central Excise

Central Excise Valuation - on account of charging consideration of Optional Service Charges and Rust Proof Protection Charges over and above the MRP would part of MRP or not. - Held that - when the goods have been cleared to the customers/ultimate buyers through a consolidated invoice which includes the price of the product plus OSC/RPP. - the goods have been sold over and above the MRP therefore the OSC/RPP are includable in the assessable value. - decided against Assessee

Summary

Issues Involved:
1. Whether Optional Service Charges (OSC) and Rust Proof Protection Charges (RPP) should be included in the assessable value of goods for the purpose of determining Central Excise duty under Section 4A of the Central Excise Act, 1944.
2. Whether the facts of the case are identical to the precedent case of Electrolux Voltas Ltd.
3. Whether the demand is barred by limitation.

Detailed Analysis:

1. Inclusion of OSC and RPP in Assessable Value:
The appellants argued that OSC and RPP are separate service contracts and not part of the sale price of refrigerators and washing machines. They contended that these charges are optional and can be availed by customers either at the time of purchase or during the warranty period, and are not essential for the completion of the sale. The appellants also highlighted that service tax has been paid on these charges, and thus, they should not be subject to Central Excise duty. However, the Tribunal found that the advertisement sticker showing a 5-year warranty affects the sale price and that customers are paying OSC/RPP at the time of purchase through a composite invoice. The Tribunal concluded that these charges are additional considerations over and above the MRP and are includable in the assessable value as per Explanation 1 to Section 4A of the Act and Board Circular No. 432/64/98-CX.3 dated 23.11.1998.

2. Comparison with Electrolux Voltas Ltd. Case:
The Tribunal examined whether the facts of the present case were identical to those in the Electrolux Voltas Ltd. case. In Electrolux Voltas Ltd., it was held that OSC charges were not part of the sale price as they were optional and not related to the sale of refrigerators. However, in the present case, the Tribunal observed that customers are paying OSC/RPP at the time of purchase through a composite invoice, and the advertisement sticker showing extended warranty affects the sale price. Therefore, the Tribunal distinguished the present case from Electrolux Voltas Ltd., concluding that the facts are not identical and the precedent is not applicable.

3. Limitation:
The appellants argued that the demands are barred by limitation as the department was aware of the OSC and RPP charges through regular audits. However, the Tribunal did not find this argument convincing and upheld the impugned orders, confirming the demands along with interest and penalties.

Conclusion:
The Tribunal upheld the impugned orders, confirming the inclusion of OSC and RPP charges in the assessable value for the purpose of determining Central Excise duty. The appeals filed by the appellants were rejected. The Tribunal found that the facts of the present case are distinguishable from the Electrolux Voltas Ltd. case and that the demands are not barred by limitation.