2014 (12) TMI 233 - AT - Central Excise

Waiver of pre deposit - MRP based valuation of goods u/s 4A - Inclusion of warranty charges - Invocation of extended period of limitation - Held that - Merely because the inclusive part of the definition describes certain elements to be included in the retail price, it does not mean that whatever is not specifically stated therein cannot be included in the retail sale price. As per the main definition, retail sale price means maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer. If that price includes warranty charges, obviously the same cannot be excluded from the retail sale price. In the instant case it is an undisputed fact that retail sale price, which was declared by the appellant/assessee included the warranty charges. Thus, as per the appellant s declaration, the retail sale price included warranty charges. As per the provisions of sub-section (2) of Section 4A, what can be deducted is the abatement of 30% to 35% notified by Central Government. This means that from the total retail sale price only the abatement of 30% to 35% can be deducted to arrive at the assessable value. There is no provision whatsoever under the law to exclude warranty charges from the retail sale price while computing the assessable value. The ld. Advocate has contended that since they are paying service tax on the warranty charges they should be permitted to exclude the same from the assessable value. This contention is again totally irrelevant. Appellant did not inform the department about the exclusion of warranty charges from the retail sale price nor did they declare the same in ER-1 return filed with the department. In fact the appellants were earlier paying duty on the value inclusive of warranty charges and in the ER-1 return what is reflected is only the assessable value and not the MRP/RSP. In view of the above, we are prima facie of the view that the appellant has suppressed the fact of excluding the warranty charges from the MRP to arrive at the assessable value and, therefore, the extended period of time has been rightly invoked. We also notice that the case laws relied upon by the department, namely, Gujarat Goldcoin Ceramics Ltd. 2007 (7) TMI 23 - CESTAT, AHMEDABAD and Sony India Ltd. 2000 (6) TMI 236 - CEGAT, NEW DELHI , supports the department s case - prima facie of the view that the appellant has not made out any case for complete waiver of pre-deposit of the dues adjudged. - Partial stay granted.

Summary

Issues Involved:
1. Inclusion of warranty charges in the Maximum Retail Price (MRP) for the purpose of calculating excise duty.
2. Applicability of service tax on warranty charges.
3. Invocation of the extended period of limitation for demand of duty.
4. Requirement of pre-deposit for hearing the appeal.

Issue-wise Detailed Analysis:

1. Inclusion of Warranty Charges in MRP for Excise Duty Calculation:
The primary issue revolves around whether the warranty charges should be included in the MRP for calculating excise duty under Section 4A of the Central Excise Act, 1944. The appellant argued that the warranty charges are separate from the sale of goods and should not be included in the MRP. However, the Tribunal held that the retail sale price (RSP) declared by the appellant included warranty charges and, as per Section 4A, only the abatement notified by the government can be deducted from the RSP to arrive at the assessable value. The Tribunal emphasized that there is no provision under the law to exclude warranty charges from the RSP while computing the assessable value. The Tribunal rejected the appellant's contention that paying service tax on warranty charges should allow their exclusion from the assessable value, stating that the inclusion of such charges in the RSP is mandated by law.

2. Applicability of Service Tax on Warranty Charges:
The appellant contended that since they were paying service tax on the warranty charges, these charges should not be included in the assessable value for excise duty. The Tribunal dismissed this argument, noting that various elements included in the RSP, such as freight and advertisement charges, also attract service tax. The Tribunal clarified that the payment of service tax on certain components of the RSP does not justify their exclusion from the assessable value for excise duty purposes.

3. Invocation of the Extended Period of Limitation:
The appellant argued that the demand was barred by limitation, as there was no suppression of facts with an intention to evade duty. The Tribunal found that the appellant had not disclosed the exclusion of warranty charges from the RSP in their ER-1 returns or through any communication with the department. Given this lack of disclosure, the Tribunal upheld the invocation of the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944, citing suppression of facts.

4. Requirement of Pre-deposit for Hearing the Appeal:
Considering the merits of the case, the Tribunal directed the appellant to pre-deposit 50% of the confirmed Central Excise duty within eight weeks to proceed with the appeal. The Tribunal stated that upon compliance with this pre-deposit requirement, the remaining duty, interest, and penalty would be stayed during the pendency of the appeal.

Conclusion:
The Tribunal concluded that the warranty charges should be included in the RSP for the purpose of calculating excise duty under Section 4A of the Central Excise Act, 1944. The Tribunal also upheld the invocation of the extended period of limitation due to the appellant's non-disclosure of the exclusion of warranty charges. Consequently, the Tribunal directed the appellant to make a pre-deposit of 50% of the duty confirmed to proceed with the appeal.