1991 (7) TMI 87 - HC - Central Excise

Summary

Issues Involved:
1. Exclusion of post-manufacturing expenses from assessable value.
2. Legality of the show cause notice demanding short-levied excise duty.
3. Deductibility of maintenance charges and site service charges from assessable value.

Summary:

1. Exclusion of Post-Manufacturing Expenses:
The petitioner company, engaged in manufacturing air-conditioners, water coolers, and refrigerators, filed new price lists excluding post-manufacturing expenses based on judicial decisions. The Assistant Collector, however, approved the price lists without allowing deductions for post-manufacturing expenses. The company challenged this decision in Writ Petition No. 189 of 1981.

2. Legality of Show Cause Notice:
The company received a show cause notice demanding Rs. 26,97,937.83 for short-levied excise duty for the period from May 19, 1980, to January 2, 1981. The company paid Rs. 6,05,800.84 under protest and filed Writ Petition No. 211 of 1981 to quash the notice and seek a declaration that post-manufacturing expenses should not be included in the assessable value.

3. Deductibility of Maintenance Charges and Site Service Charges:
The Assistant Collector allowed deductions for additional tax on sales tax but disallowed deductions for maintenance charges and site service charges, considering them as after-sales services promoting marketability. The company argued that maintenance service contracts are optional and distinct from warranty obligations, and thus should not be included in the assessable value. The court agreed, noting that maintenance services are optional and distinct from warranty services. Similarly, site service charges, which include design assistance and installation inspection, are independent of warranty obligations and should also be excluded from the assessable value.

Conclusion:
The court declared that the revised price lists filed by the company should have been approved after allowing deductions for additional tax on sales tax, maintenance charges, and site service charges. The Assistant Collector's order was set aside, and the Assistant Collector was directed to take consequential steps to give effect to this judgment. The bank guarantees furnished by the petitioners were ordered to be discharged.