1997 (10) TMI 178 - AT - Central Excise

Summary

Issues:
Inclusion of security deposit in assessable value.

Analysis:
The case involved a dispute regarding the inclusion of a security deposit in the assessable value. The appellants, who manufactured engines and generating sets, had a scheme where a sum of Rs. 300/- was collected as a security deposit for installation work, to be refunded upon completion. The Assistant Collector contended that these charges were after-sales service charges and not deductible from the assessable value. The Collector (Appeals) upheld this decision, leading to the present appeal.

The Tribunal examined the scheme implemented by the appellants, which did not specifically mention a security deposit but outlined compensation for installation and customer training services. It was agreed that charges for installation and training were excludible from the normal price. The key issue was whether the specific compensation for labor during the warranty period was deductible. The Revenue argued that expenses during the warranty period enriched the value of the product and were includible in the assessable value, citing various judgments to support their position.

The Tribunal analyzed the circular detailing the services provided and noted that the manufacturers were not obligated to provide free services to customers, even during the first year. It differentiated between warranty charges, which enhance marketability by ensuring free repairs, and the case at hand where the manufacturer did not undertake any responsibility post-sale. As there was no promise of free repairs, the deposit could not be categorized as a warranty or after-sales service charge, making it non-includible in the assessable value.

In conclusion, the Tribunal found no justification for including the Rs. 300/- security deposit in the assessable value. The appeal was allowed, the Collector's order was set aside, and consequential relief was directed if necessary.