1998 (1) TMI 173 - AT - Central Excise

Summary

Issues:
1. Whether the recovery of service charges by the appellants should be considered part of assessable value for excise duty calculation.
2. Whether the demand raised against the appellants is barred by time.
3. Whether the appellants received deferred price or service charges for after-sale services.

Detailed Analysis:
1. The issue in this case revolved around whether the recovery of service charges by the appellants should be included in the assessable value for the calculation of excise duty. The Additional Collector of Central Excise confirmed a duty demand against the appellants for not including service charges in the invoice value of excisable goods. The appellants argued that the service charges were solely for covering incidental expenditures during the guarantee period and should not be considered part of the assessable value. The Additional Collector held that the service charges had a nexus with the marketability of the goods and should be included in the assessable value. He also noted that the appellants recovered service charges even before rendering any services, leading to a duty demand and penalty imposition.

2. The appellants contended that the demand raised against them was barred by time. They argued that the investigations concluded in August 1989, and the show cause notice issued in December 1989 was untimely. However, the tribunal disagreed, stating that the investigations were completed in August 1989, and the notice issued in December 1989 was not delayed. The tribunal distinguished this case from previous judgments where there was significant delay in issuing show cause notices, thereby rejecting the time bar argument.

3. The crucial issue was whether the appellants received deferred price or service charges for after-sale services. The tribunal analyzed the evidence presented by both parties. The appellants demonstrated that the service charges were optional and only provided to customers who requested maintenance services after the sale. They provided evidence of oral understandings with customers for maintenance services. The tribunal noted that service charges were collected only from specific customers and not universally. The tribunal also highlighted that the department failed to disprove the appellants' claims. Relying on the judgment in Collector of Central Excise v. Kelvinator of India Ltd., the tribunal held that optional service contracts for maintenance after the warranty period were not includible in the assessable value. Consequently, the tribunal set aside the duty demand and penalty, ruling in favor of the appellants.

In conclusion, the tribunal ruled in favor of the appellants, holding that the service charges were not part of the assessable value for excise duty calculation, the demand was not time-barred, and the appellants did not receive deferred price but service charges for after-sale services.