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2011 (7) TMI 983 - AT - Central ExciseMRP bases valuation under section 4A - Charging Optional Service Charges (OSC in short) and Rust Proof Protection Charges (RPP in short) over and above the MRP - Violation of principles of natural justice - Circular No. 432/64/98-CX.3, dated 23-11-98 - Held that on top of the packing box of each refrigerators/washing machines there is a sticker showing 5 years warranty which is very much in the knowledge of the customers when they buy the refrigerators/washing machines - It is also the fact on record that when these refrigerators/washing machines were cleared by their dealers to retail customers, dealers issue a composite invoices for the sale price OSC/RPP - The contention of the appellants that the OSC is an additional consideration and is not affecting the value of the goods chargeable to duty under MRP valuation is not convincing as the goods were cleared by the dealers of the customers through consolidated invoices wherein the MRP OSC and RPP are collected from the customers collectively - the goods have been sold over and above the MRP, therefore, the OSC/RPP are includable in the assessable value - Decided against the assessee
Issues Involved:
1. Whether Optional Service Charges (OSC) and Rust Proof Protection Charges (RPP) collected over and above the Maximum Retail Price (MRP) should be included in the assessable value for the purpose of determining Central Excise duty. 2. Whether the facts of the case are identical to the precedent case of Electrolux Voltas Ltd. 3. Whether the demands are 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 that do not affect the MRP-based valuation under Section 4A of the Central Excise Act, 1944. They contended that these charges are optional and only come into effect after the expiry of the built-in warranty period. Furthermore, they argued that these charges are subject to service tax and should not be included in the assessable value for excise duty. The Tribunal found that the customers are made aware of the 5-year warranty through stickers on the product packaging, and these charges are collected at the time of sale through a composite invoice. The Tribunal concluded that since the customers pay OSC/RPP at the time of purchase, these charges should be included in the assessable value. The Tribunal rejected the appellants' argument that the OSC/RPP are optional, noting that customers must file for a refund if they do not opt for these services, which contradicts the notion of these charges being optional. 2. Comparison with Electrolux Voltas Ltd. Case: The appellants relied heavily on the precedent set by Electrolux Voltas Ltd., where it was held that OSC charges are not includable in the assessable value. However, the Tribunal distinguished the facts of the current case from Electrolux Voltas Ltd. In Electrolux Voltas Ltd., there was no evidence that the retail sale price was increased by the OSC charges, and the OSC was considered genuinely optional. In the present case, the Tribunal observed that the customers are charged OSC/RPP at the time of purchase through a composite invoice, making these charges an integral part of the sale price. Therefore, the facts of the current case were found to be distinguishable from Electrolux Voltas Ltd., and the Tribunal held that the charges are includable in the assessable value. 3. Limitation Period: The appellants contended that the demands are barred by limitation, arguing that the department was aware of the OSC/RPP charges through regular audits. They claimed that there was no suppression of facts or intent to evade duty. The Tribunal did not specifically address the limitation issue in detail in the judgment. However, by upholding the impugned orders, it implicitly rejected the appellants' contention regarding the limitation period. Conclusion: The Tribunal upheld the impugned orders, confirming the inclusion of OSC and RPP in the assessable value for the purpose of determining Central Excise duty. The Tribunal distinguished the facts of the case from the Electrolux Voltas Ltd. precedent and found that the charges collected at the time of sale through a composite invoice are not genuinely optional. Consequently, the appeals filed by the appellants were rejected.
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