2015 (9) TMI 517 - AT - Central Excise

Duty demand - Valuation - Whether warranty charges can be allowed to be deducted from the MRP for the purpose of valuation under Section 4A - Held that - From the reading of section 4A in subsection (2) it is very clear that while arriving at the assessable value for the retail sale price an amount of abatement is specified by notification can only be deducted. In the present case, on CTVs the abatement during the relevant period was provided within the range of 30% to 35% in terms of Notification 2/2006-CE (NT) dated 1/3/2006 as amended from time to time. From the subsection (2) is can be seen that except notified abatement no other deduction such as warranty or any other charges are allowed to be deducted. It is also seen from explanation 1 under subsection (4) of section 4A that as per the definition of retail sale price, the price at which the goods is sold in packaged form to the ultimate consumer which includes, local or other taxes, freight, transportation charges, commission payable to dealer and all charges towards advertisement, delivery, packaging, forwarding and the like. Price which affixed on the package of CTVs is undisputedly maximum retail sale price and no deduction can be allowed from the said retail sale price other than the abatement as statutorily provided under the notification. In the instant case, the fact is that the RSP was declared by the appellant including the warranty charges and the same was affixed on the package. Thus as per the appellant s declaration itself the retail sale price includes the warranty charges. It that is so the abatement ranging from 30% to 35% as notified by the government shall only be allowed and in term of subsection (2) of section 4A no any other deduction is permissible to arrive at the assessable value. Therefore there is no provision under the law to exclude warranty charges from the retail sale price while computing the assessable value. Statutory provision under Section 4A cannot be altered or influenced merely because the appellant has chosen to discharge service tax on portion of the retail sale price. Therefore merely because the service tax was paid, deduction of the said value cannot be allowed as no such option has been provided either under the Central Excise Act, or under the Finance Act, 1994. Appellant during to a particular period were including warranty charges in the RSP and discharging the excise duty accordingly, but on their own they changed the system and started deducting warranty charges from the RSP, however this was done knowingly by the appellant which was neither declared to the department nor any opinion was sought for from the department, this act of the appellant is clearly amounts to suppression of fact. Excise duty has been calculated on full MRP minus abatement, whereas excise duty at the time of clearance has been paid after deduction of 150/- from the MRP. This shows that the appellant was in full knowledge that the excise duty was required to be paid on full MRP minus abatement but they paid less duty intentionally therefore this is clear case of suppression of fact and the appellant s submission that the demand being time bar is not tenable. - Decided against assessee.

Issues Involved:
1. Deduction of warranty charges from the Maximum Retail Price (MRP) for valuation under Section 4A of the Central Excise Act, 1944.
2. Applicability of both Central Excise duty and Service tax on the same transaction.
3. Invocation of the extended period of limitation due to alleged suppression of facts by the appellant.
4. Imposition of penalty and interest under Sections 11AC and 11AB of the Central Excise Act, 1944.

Detailed Analysis:

1. Deduction of Warranty Charges from MRP:
The core issue is whether the appellant can deduct warranty charges from the MRP for the purpose of valuation under Section 4A of the Central Excise Act, 1944. The appellant argued that the warranty service is a separate contract from the sale of CTVs, and hence, its charges should not be included in the MRP. However, the Tribunal found that Section 4A allows only for notified abatements to be deducted from the MRP. The definition of "retail sale price" includes all charges towards advertisement, delivery, packing, forwarding, and the like, implying that warranty charges are inherently included in the MRP. The Tribunal concluded that no deductions other than the notified abatement are permissible, and hence, warranty charges cannot be deducted from the MRP.

2. Applicability of Both Central Excise Duty and Service Tax:
The appellant contended that both Central Excise duty and Service tax cannot be levied on the same transaction. The Tribunal rejected this argument, emphasizing that the legislature has consciously decided to levy both taxes on certain components, including warranty charges. The Tribunal noted that the definition of "transaction value" under Section 4 includes warranty charges, indicating the legislative intent to include such charges in the assessable value for excise duty purposes. The Tribunal held that the payment of Service tax on warranty charges does not exempt the appellant from paying Central Excise duty on the same.

3. Invocation of Extended Period of Limitation:
The appellant argued that the demand was time-barred as they had paid Service tax on warranty charges, which was higher than the excise duty demanded. The Tribunal found that the appellant had changed their practice of including warranty charges in the MRP without informing the department, which constituted suppression of facts. The Tribunal observed that the appellant was aware that excise duty should be paid on the full MRP minus abatement but intentionally paid less duty. Therefore, the extended period of limitation was rightly invoked.

4. Imposition of Penalty and Interest:
The Tribunal upheld the imposition of penalty and interest under Sections 11AC and 11AB of the Central Excise Act, 1944. The Tribunal noted that the appellant's act of deducting warranty charges from the MRP without informing the department amounted to suppression of facts with intent to evade duty. Consequently, the penalty and interest imposed by the Commissioner were sustained.

Conclusion:
The Tribunal dismissed the appeals, sustaining the impugned order, and held that:
- No deductions other than the notified abatement are allowed from the MRP for valuation under Section 4A.
- Both Central Excise duty and Service tax can be levied on the same transaction.
- The extended period of limitation was correctly invoked due to suppression of facts.
- The imposition of penalty and interest was justified.

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