2011 (8) TMI 831 - AT - Central Excise

Valuation under 4A of MRP - warranty charges - Held That - After sales service charges for four years being optional, not includible for valuation purpose while determining MRP under Section 4A of Central Excise Act, 1944.

Summary

Issues:
Central excise duty on warranty charges for washing machines.

Detailed Analysis:

Issue: Central excise duty on warranty charges for washing machines.
Facts: The respondents were offering a one-year warranty for all washing machines, including components of wash and spin group, free of charge to the consumer. Additionally, they provided an optional warranty for five years after the initial free warranty period, charging Rs. 300 per washing machine for this optional warranty.
Adjudication: The Addl. Commissioner confirmed a duty of Rs. 13,84,877 on these charges, imposed an equal penalty under Sec. 11AC of the Central Excise Act, 1944, and demanded interest under Sec. 11AB of the Act. A penalty of Rs. Two lakhs was also imposed under Rule 173Q of the Central Excise Rules.
Appeal: The respondents appealed to the Commissioner of Central Excise (Appeals), who set aside the Order-in-Original and allowed the appeal.
Tribunal Decision: The Tribunal noted that a previous decision had held that after-sales service charges are not to be included in the assessable value. The Tribunal had already decided this issue in the respondents' own case, where it was held that after-sales service charges for optional warranties are not includible for valuation while determining MRP under Section 4A of the Central Excise Act, 1944.
Conclusion: Based on the precedent set in the respondents' own case, the Tribunal rejected the appeal filed by the Revenue, stating that there was no merit in challenging the inclusion of after-sales service charges in the assessable value for central excise duty purposes. The appeal was therefore dismissed.

This detailed analysis covers the central issue of central excise duty on warranty charges for washing machines, outlining the facts, adjudication, appeal, Tribunal decision, and final conclusion based on precedent.