1988 (5) TMI 218 - AT - Central Excise

Summary

Issues:
1. Demand for central excise duty and penalty against the appellants for not disclosing warranty charges in price-lists.
2. Whether the warranty charges were compulsory or optional for customers.
3. Grounds of limitation in the case.

Analysis:

Issue 1 - Demand for central excise duty and penalty:
The appellants contested the demand for central excise duty and penalty, arguing that the warranty charges were already included in the declared sale price and were optional for customers. The Collector alleged that warranty charges were compulsorily recovered but not disclosed in price-lists. The department received information from a dealer in 1979 about compulsory warranty charges, leading to show cause notices. However, the appellants denied compulsory collection and provided evidence of instances where no warranty charges were collected. The department's presumption of compulsory collection was based on incomplete evidence. The appellants presented invoices and records to support their stance that warranty charges were optional, not compulsory. The Tribunal found that the department failed to prove compulsory collection, thus ruling in favor of the appellants.

Issue 2 - Compulsory vs. optional warranty charges:
The Tribunal examined the evidence provided by the appellants, including sales records and invoices, to determine whether warranty charges were compulsory. The appellants argued that the warranty scheme was optional and not included in the assessable value of TV sets. The department's failure to establish compulsory collection led the Tribunal to accept the appellants' claim that the charges were optional and for services rendered after the initial sale. The Tribunal emphasized that the burden of proof lay with the department, which it did not discharge satisfactorily.

Issue 3 - Grounds of limitation:
Regarding the plea of limitation, the appellants highlighted that the department had initiated proceedings twice earlier but dropped them, indicating awareness of the warranty scheme. The Tribunal agreed that the department's prior knowledge prevented invoking an extended period of five years for demand. Since the demand related to a period outside the normal six-month limit and the show cause notice was issued late, the entire demand was deemed time-barred. The Tribunal acknowledged the appellants' lack of mala fides and attributed the omission of declaring warranty charges in price-lists to the department's prior actions and guidance.

In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellants and granting them consequential relief. The judgment emphasized the appellants' satisfactory explanation for the warranty scheme and the department's failure to establish compulsory collection of charges, leading to the decision in favor of the appellants on all issues raised in the case.