2017 (9) TMI 1174 - AT - Central Excise

Valuation - washing machine - includibility - extended warranty service charges - Held that - the respondents have been able to establish that the three year extended warranty period is only optional service contract with the customer and not a compulsory one. This being so, the same is not includible in the assessable value - the duty demand is less than ₹ 10 lakhs. Therefore, the appeal is not maintainable on monetary limits also - appeal dismissed - decided against Revenue.

Summary

Issues:
Duty liability on extended warranty charges collected by manufacturer, Inclusion of extended warranty charges in assessable value, Optional vs. compulsory nature of extended warranty charges, Monetary limit for appeal validity.

Analysis:
1. Duty liability on extended warranty charges: The case involved a dispute regarding the duty liability on extended warranty charges collected by the manufacturer. The department contended that the extended warranty charges were not optional but compulsory, thus should be included in the assessable value for duty calculation purposes.

2. Inclusion of extended warranty charges in assessable value: The appellant argued that the extended warranty charges were collected separately as 'optional service contract charges' and were reimbursed to the dealers with necessary proof. The appellant maintained that the charges were compulsory and hence should be included in the assessable value for duty calculation.

3. Optional vs. compulsory nature of extended warranty charges: The key point of contention was whether the extended warranty offered by the manufacturer was optional or compulsory. The Commissioner (Appeals) found evidence to support that the extended warranty was indeed optional, as customers had the choice to opt-out of the service without any compulsion.

4. Monetary limit for appeal validity: Additionally, the respondents highlighted that the duty demand was less than ?10 lakhs, questioning the maintainability of the appeal based on monetary limits. The Tribunal dismissed the appeal on both merits and monetary limitations, reinforcing the decision based on the optional nature of the extended warranty charges.

In conclusion, the Appellate Tribunal upheld the decision of the Commissioner (Appeals) by determining that the extended warranty period offered by the manufacturer was optional and not compulsory. Therefore, the extended warranty charges were not includible in the assessable value for duty calculation. The appeal was dismissed on both substantive and monetary limit grounds.