2018 (11) TMI 733 - AT - Central Excise

Vacation of protest - duty paid under protest for clearance of warranty goods - Held that - The Department has not disputed that the goods were cleared under warranty replacement - also the department has not disputed that the warranty cost of 2.5% of the factory cost was already included in the original value of the equipment at the time of removal of the original equipment - also the appellant has not charged any price for the replacement of the goods during the warranty period. In the circular issued by the Department on 30.6.2000 it is also clear that the appellant is not required to pay the excise duty on the goods cleared under warranty/replacement clause. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of appeal by Commissioner (A) regarding payment of excise duty on warranty spares/components.
- Dispute over payment of excise duty for clearance of goods under warranty/replacement.
- Application of Central Excise Valuation Rules, 2000.
- Judicial precedent and circular issued by the Department.

Analysis:
1. The appeal was filed against the rejection of the appellant's appeal by the Commissioner (A) concerning the payment of excise duty on warranty spares/components. The appellant contended that the warranty charges were already included in the total sale price of the equipment, and no duty should be payable on the clearances of components against warranty obligations.

2. The main issue for determination was whether the department's demand for excise duty for the clearance of goods under warranty/replacement, during the warranty period, and the denial of refund of duty paid under protest were justified. It was noted that the goods were cleared under warranty replacement, and the warranty cost was already included in the original value of the equipment at the time of removal.

3. The appellant argued that the decision relied upon by the Commissioner (A) in the case of BHEL was not applicable as it was decided under the earlier Valuation Rule, not the Valuation Rules of 2000 applicable in the present case. Additionally, the appellant highlighted that in a similar issue, the Commissioner (A) in Mangalore had allowed the appeal and granted a refund, emphasizing that the department should not take a contrary stand for the same issue in different Commissionerates.

4. After considering the submissions and perusing the material on record, the Tribunal held that the impugned order was not sustainable in law. It was concluded that the appellant was not required to pay excise duty on goods cleared under warranty/replacement clause based on the circular issued by the Department on 30.6.2000. Consequently, the appeal was allowed, and the impugned order was set aside with consequential relief, if any.

5. The Tribunal's decision was based on the interpretation of the Central Excise Act, 1944, and the Central Excise Valuation Rules, 2000, along with the application of judicial precedents and the circular issued by the Department. The judgment emphasized the importance of consistency in decision-making across different Commissionerates and upheld the appellant's claim regarding the payment of excise duty on warranty goods.