Custom, Excise & Service Tax Tribunal
Videocon Industries Ltd vs Commissioner Of Central Excise, ... on 1 April, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/289 & 1165/11-MUM [Arising out of Order-in- Original No. 52-53/CEX/COMMR/2010 dated 19/11/2010 passed by the Commissioner of Central Excise & Customs & Service Tax, Aurangabad] For approval and signature: Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental: Yes
authorities?
=======================================================
Videocon Industries Ltd.
:
Appellants
VS
Commissioner of Central Excise, Aurangabad
:
Respondent
Appearance
Shri. V. Sridharan, Sr. Advocate and Shri. Gajendra Jain, Advocate for the Appellants Shri. Rakesh Goyal, Addl. Commissioner(A.R.) for the Respondent CORAM:
Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) Date of hearing: 1/4/2015 Date of decision /2015 ORDER NO.
Per : Ramesh Nair These appeals are directed against Order-in-Original No. 52-53/CEX/COMMR/2010 dated 19/11/2010 passed by the Commissioner, Central Excise, Customs & Service Tax, Aurangabad.
2. The fact of the case is that the appellant M/s. Videocon Industries Ltd., Aurangabad are manufacturers of various consumer durables including Colour Televisions(CTVs) of various sizes/models falling under Chapter 85 of the Central Excise Tariff Act, 1985. The appellant had entered into agreement with M/s. ELCOT (A Govt. of Tamilnadu Enterprises) for supply of 14 CTVs during the period August 2006 to January 2009. The appellant had opted for payment of Central Excise duty on MRP basis under the provisions of Section 4A of the Central Excise Act, 1944. In the purchase order of ELCOT, it was indicated that unit price is inclusive of all accessories, taxes, duties and warranty charges, etc. However, the warranty charges of Rs. 75/- per TV will be paid to the supplier only after the end of 1st year and another Rs. 75/- at the end of 2nd year. This unit price including the warranty charges is declared as MRP on all the package of TVs. However, while discharging the Excise duty liability, the appellant had worked out the assessable value as MRP minus warranty charges of Rs. 150/- In view of the above a show cause notice dated 25/2/2010 was issued to the appellant demanding differential excise duty of Rs. 3,87,14,771/- under the provisions of proviso to Section 11A(1) of Central Excise Act, 1944 alongwith interest thereon under Section 11AB ibid. The notice also proposed to impose penalty on the appellant under the provisions of Section 11AC of the Central Excise Act read with Rule 25 of the Central Excise Rules, 1944. The said notice was adjudicated by the Commissioner of Central Excise, Aurangabad vide the impugned order and the Ld. Commissioner passed following order:
(i) The valuation and assessment of the CTVs in question cleared by the assesse to M/s. ELCOT are required to be made with reference to their retail sale price under Sec 4A of the Central Excise Act 1944, and not as proposed in the said Notice dated 1/4/2010 based on the purchase order price under Sec 4 of Central Excise Act, 1944. In consequence, the proposal in the Notice dated 1/4/2010, to demand differential Central Excise duty amounting Rs. 32,07,89,187/- from the assesse, M/s. Videocon Industries Ltd., 14 KM Stone, Paithan Road, Aurangabad and also the related proposal to levy interest under Sec 11AB and to impose penalty under Section 11AC, cannot be sustained and will have to be dropped, which I hereby do.
(ii) (a) No deductions other than the notified abatement is allowed from the MRP to arrive at the assessable value under Section 4A.
(b) Warranty charges have been incorrectly deducted by the assesse from MRP for arriving at assessable value under Secion 4A of the Central Excise Act, 1944.
(c) I hereby confirm, on the assesse, M/s. Videocon Industries Ltd. 14 KM Stone Paithan Road, Aurangabad, the demand of Rs. 3,87,14,771/- being the duty not paid on the total quantum of warranty charges incorrectly deducted by the assesse for the purpose of arriving at assessable value under Section 4A of the Central Excise Act, 1944 and discharge of duty liability thereon, as proposed in the show cause notice No. 21/CEX/COMMR/2010 dated 25/2/2010 under the proviso to Section 11A(1).
(d) I confirm the recovery of interest, at the appropriate rates, on the amount of Rs. 3,87,14,771/- determined and confirmed at ii(b) above, from the assesse M/s. Videocon Industries Ltd. 14 KM Stone, Paithan Road, Aurangabad, under Section 11AB of Central Excise Act, 1944.
(e) I impose a penalty of Rs. 3,87,14,771/- on the assesse, M/s. Videocon Industries Ltd. 14 KM stone, Paithan Road, Aurangabad under Section 11AC of Central Excise Act, 1944.
Aggrieved by the aforesaid impugned order, appellant is before us.
3. Shri. V Sridharan, Ld Sr. Counsel appearing on behalf of the appellant made the following submissions:
(a) In the present case, the sale of CTV is separate from service for warranty. The consideration for warranty service is separate from consideration for sale of CTV.
(b) The tender itself has been divided in two distinct parts, first part is for purchase/supply of CTVs & Second part is for supply of warranty services.
(c) If the obligation of warranty is not satisfactorily fulfilled by the Appellants, the Purchaser has right to terminate the warranty maintenance contract and claim damage for non-fulfilment of warranty contract. It is a case where the prices of CTVs remain unaltered even if warranty services are not satisfactory rendered by the appellants. In other words, the supply of warranty service is not a covenant for supply of CTV.
(d) The Purchase Order has been divided in two parts, first part is a price for purchase/supply of CTVs and second part is for warranty service for 1st /2nd /3rd (as the case may be) including service tax.
(e) The appellants have rendered warranty services separately. The appellant have set up authorised service stations and call centers for fulfilling the obligation under the warranty bargain. The appellants have employed/appointed authorised technicians and arranged for spares and equipment for fulfilling the obligations under the warranty bargain. The fact that the appellants receive payment at the end of first year, second year and third year also go to show that obligation under contract for warranty service is separate obligation. The consideration for warranty is separate and received after the obligation is fulfilled. In view of the above, there are two separate contracts one for supply of CTVs and other for supply of warranty services.
(f) If there is one consolidated price for two distinct supplies, then the consolidated price needs to be apportioned over the two supplies. It is well settled law that if there is one consolidated price for two distinct supplies, then the consolidated price needs to be apportioned over the two supplies. As to what should be the method of apportionment, is a different question which fortunately does not arise in the present case since separate considerations for the different supplies involved have been agreed between the parties concerned.
(g) There are number of instances involve apportionment. Suppose, an assesse manufactures and sells toothpaste and toothbrush for a consolidated MRP. There are no violation under Weight and Measurement Act. Further, for ease suppose, toothbrush and toothpaste are liable to be duty on MRP basis and the rate of abatement is same. In this simple case, there is no need for apportionment since there is no tax implication. Apportionment would become necessary in cases where one product is to be valued under Section 4 and other product is valued under Section 4A, or where one product is traded and other manufactured, or combinations of preceding illustrations. In the above context, the appellant rely upon the leading commentary in Income tax AC Sampath Iyengar under the general heading Apportionment of a consolidated receipt. The appellant also rely upon following judgments which have applied the principles of apportionment in different situations:
(i) ITO Vs. Sriram Bearings[1997(10)SCC332]
(ii) Ishikawajm-Harima Heavy Vs. DIT[2007(6) STR 3 (SC)]
(iii) State of Madras Vs. Gannon Dunkerly[1958(9) STC 353(SC)]
(iv) State of Gujarat Vs. Elecon Engg Co.[1993(90) STC 74(Guj)]
(v) State of Tamil Nadu Vs Titanium Equipments & Anode[1998(110) STC 43 (Mad)] In view of the above, the principle of apportionment needs to be applied and the consolidated price needs to be disintegrated to arrive at the value of CTV and warranty services. So done, the demand of excise duty on warranty services would not survive.
(h) A plain reading of the definition of retail sale price would show that retail sale price is maximum price at which the goods may be sold. The expression price at which goods are sold has a specific legal connotation in Indian law. This expression would include all charges which are covenant to the transfer of the property in the goods. The inclusive portion of the definition carries this concept forward and specifically includes all elements which are instrumental in bringing the goods at the point of purchase by the ultimate consumer. This is so because the aforesaid elements are integral covenants of sale of goods.
(i) Specific mention in the inclusive portion of the definition is not decisive. Suppose certain charges are incurred for transporting the goods from dealer place to the consumers place and for this activity, the dealer charges separately to the consumer over the above the retail sale price. It is nobodys case that this amount charged by the dealer should form part of retail sale price on the ground that transportation charges is specifically mentioned in the inclusive portion of the definition. This is rightly so because this amount is not part of the covenant of the sale of goods. This amount is for separate activity and bargain. For this proposition, the appellants rely upon the judgments of the Honble Supreme Court in State of Karnataka Vs. Bangalore soft drinks[2000(117) STC 413]. Similarly in the present case, warranty services is not covenant for sale of CTV and hence, Explanation 1 to Section 4A does not cover the warranty services provided by the appellants.
(j) In the present case, service tax and excise duty cannot be levied simultaneously on the same value. Warranty is a supply of service and the appellants have paid service tax on the consideration received towards warranty services. It is submitted that services cannot taxed under the Central Excise Act, 1944. Hence the department cannot be demand excise duty on the warranty services rendered by the appellants. The Honble High Court and CESTAT in the following judgments have specifically held that Service tax and Excise duty cannot be levied simultaneously where services are a separate bargain and on which service tax has been discharged.
(i) Ericsson India Vs. CCE[2007(218) ELT 198(Tri)]
(ii) Osnar Chemicals Vs. CCE[2009(240) ELT 115 (Tri)]
(iii) Ericsson India Vs. CCE [2013(294) ELT 599(Tri)]
(iv) HCL Infosystem Vs. CCE[2009(245) ELT 712(Tri)]
(v) Transformers & Electricals Vs. CCE[2009(14) STR 737(KER)]
(k) The appellant submit that they are correctly liable to pay service tax on warranty services which stands discharged. In view of the aforesaid judgments, the demand of excise duty on the said warranty services is incorrect. The impugned order-in-original are therefore liable to be set aside.
(l) The Ld. Departmental Authorised Representative argued that excise duty as well as Service tax both can be levied simultaneously. Ld. D.R. in this context relied upon the definition of transaction value under Section 4 wherein the warranty service is included in the transaction value. Therefore, Ld. D.R. argued that warranty service is chargeable to service tax as well as excise duty. The appellant submit that if warranty services are integral part of sale of goods, than the said warranty would become part of sale price of goods. In the present case, warranty services is separate activity and not integral part of sale of CTVs. If the appellants do not satisfactorily perform warranty services, the customer is not liable to pay the amount charged towards warranty but the customer is liable to pay consideration towards sale price of CTVs. Hence, the argument of the department that warranty is includible in assessable value is baseless and incorrect. The appellant have paid service tax on value on which there is demand of excise duty. The rate of service tax was always on the higher side during the period under consideration. The amount of service tax paid/payable is also more than the demand of excise duty. Under the facts, the amount of service tax already paid by the appellants should be adjusted and appropriated against the excise liability. Hence, no further demand would lie.
(m) Even if it held that excise duty is payable on the warranty services, then this does not lead to the automatic conclusion that orders should be upheld. The Honble Tribunal then as court has to decide relief due to the parties involved. If such a conclusion is reached, then it would be clear that service tax has been wrongly paid and therefore the amount already paid as service tax should be adjusted towards the excise duty liability. The rate of service tax was always on the higher side during the period under consideration. The amount of service tax paid/payable is also more than the demand of excise duty. This contention as raised by the appellants before the adjudicating authority and there is no rebuttal as far these. The relief eligible to the parties involved has been considered in number of judgments.
(n) In CCE Vs. Telco[2006(196) ELT 308 (T)], the assesee availed credit on purchase of Tool Kits given along with the vehicle. The contention of the department was that credit on Tool Kits is not available as Tool Kits are not inputs for the manufacture of vehicle. However, the assesse paid excise duty on the vehicle on value which was inclusive of the value of Tool Kits also. In this scenario, the CESTAT has held that credit on Tool Kits is not available to the assesee, however, the assesse cannot be asked to pay the entire credit amount without adjusting the duty paid on Tool Kit while clearing the vehicles from the factory. Hence the adjustment of duty with the credit was duly allowed by the CESTAT.
(o) In sales tax law, a dispute which often arises for consideration of the courts is that where an assesse has paid sales tax in one state, say Maharashtra, whereas the court come to conclusion that the same was payable to other state, say Gujarat. In that context, the Honble Supreme Court has repeatedly held that the sales tax already paid to Maharashtra should be adjusted while demanding sales tax by Gujarat State. He has referred following judgments:
(i) Oil India Ltd Vs. the Superintendent of Taxes[1975 1SCC 733]
(ii) UOI Vs. K. G. Khosla& Co. Ltd.[(1979) 2 SCC 242]
(iii) Sahney Steel & Press Works Ltd. Vs. Commercial Tax Officer[(1985) SCC 173]
(iv) Bharat Heavy Electrical Ltd. Vs. UOI [1996) 4 SCC 230] The aforesaid judgments, the Honble Supreme Court has held that States should adjust the amount of tax collected by them if one State has wrongly collected tax due to other state. In the present case, the adjustment is to be done within the same Commissionerate. In other words, the adjustment of service tax paid with excise duty demand within the same jurisdictional commissionarate should be allowed in view of the aforesaid judgments of Supreme court. Hence, no portion of the demand.
(p) The Ld. A.R. placed reliance on the decision of Godrej & Boyce manufacturing Company[2011(273) ELT (T) wherein the CESTAT has held that the value of Optional Warranty Services provided to the customer is includible in the assessable value as determined under Section 4A. The appellant submits that the ratio of CESTAT in the Godrej and Boyce is not applicable for number of reasons. First of all, the CESTAT in the facts of that case concluded that warranty contract is not a separate contract. Whereas, in the present case, as already submitted supra, warranty contract is a separate contract. Further, the Cestat did not have occasion to consider the effect of the case laws cited above.
(q) The demand in the present case for the period December 2007 to January 2010 is beyond the normal period of limitation. The appellant submit that they have paid service tax on warranty charges and rate of service tax during the relevant period was higher than the rate of duty of excise. Therefore, the amount of service tax paid is higher than the demand of excise duty in the present case. Therefore, there cannot be any intent to evade payment of duty when the service tax already paid is higher than the excise duty now demanded. The extended period of limitation cannot be invoked when there is no intent to evade payment of duty.
(r) The appellant further submits that they have properly filled and filed the ER-1 returns. There is absolutely no allegation that any particular information, which was required to be submitted in the return, was not submitted. The information which was not required to be submitted in law and therefore not submitted cannot be treated as suppression. In any case, there is no particular column in the ER-1 return to show the method of determination of assessable value adopted by the assesse. Therefore deficiency in the prescribed format of form will not amount to non-disclosure on the part of the notices and therefore there is no suppression on the part of the appellant. Following judgments were relied upon:
(i) Muthiah Chettiar Vs CIT[1969(1)SCC 675]
(ii)Malegaon Electricity Co (P) Ltd. Vs. CIT[1970(2) SCC 431]
(iii) CIT Vs. P.K. Kochammu Amma, Peroke[1981(1) SCC 241]
(iv) ITO Vs. Radheshyam Ladia[1987(2) SCC 616]
(s) The appellants submits that for the period prior to the period in dispute, they were including the warranty charges in the MRP and paying excise duty on the same. However, the appellants subsequently realised that warranty charges are liable to service tax and not liable to excise duty. Therefore, the appellants had started paying service tax and stopped paying excise duty on the same. There is no requirement in law to intimate to department about the aforesaid corrective measure taken by the appellant. The information which was not required to be submitted in law and therefore not submitted cannot be treated as suppression. Hence, the allegation of suppression on the ground that the appellant have not informed to the department when they changed their practice is absolutely incorrect and baseless. In any case, such an act cannot be alleged to be with an intention to evade payment of duty because the appellants bonafide opted to pay service tax which is on higher side vis-a vis excise duty demand.
(t) The appellant submit that the imposition of equal amount of penalty on the appellant is not correct. The demand of duty is not sustainable in terms of the aforesaid submissions and therefore the imposition of penalty is also liable to be set aside. The issue involved in the present case is purely interpretation of the contract and the legal provisions. It is well settled that imposition of penalty is not sustainable in the cases where issue relates to interpretation of legal provisions and contract. Interest is also not payable when the demand of duty is not maintainable in view of the submissions made in the aforesaid paragraphs.
4. On the other hand Shri. Rakesh Goyal, Ld. Addl. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that in this case, the main argument of the appellant is that both Central Excise duty and Service tax cannot be levied on the warranty charges and only one can be levied. He submits that it is nowhere mentioned in Central Excise Act or Rules made thereunder or in Finance Act. 1994 that there is a bar on levy of both Central Excise duty and Service tax on the same transaction. The system of taxation in India is that there many taxes like Central Excise duty, service tax, Sales tax, Octroi, purchase tax etc and many of them are levied on the same goods. There is no bar that once a particular tax has been levied, no other taxes can be levied on the same goods. Just because Central Excise duty and service tax are being administered by the same department, it cannot be said that both cannot be simultaneously levied when no such stipulation is there in the statute. As per Section 4 of Central Excise Act, 1944 the duty of Excise is chargeable on transaction value. From the definition of Transaction value, it is clear that Central excise duty is payable on advertising or publicity, marketing and selling organization expenses, storage,outward handling servicing, warranty, Commission or any to other matter. On all these activities, service tax is leviable but legislature took a conscious decision that excise duty is also payable on these components. It is noteworthy that warranty is specifically included for payment of excise duty which is under consideration in this case.
4.1 There is no dispute that television sets are mentioned in notification and are also required under the provisions of Standard of Weight and Measures Act, 1976 for declaring retail sale price. There is also no dispute that television sets are liable to Excise duty under Section 4A of the Act on the Basis of retail sale price. As per sub section 1 fo Section 4A, the value shall be deemed to be the reail sale price declared on such goods less abatement. In the present case, the full retail sale price of Rs. 2197/- has been declared on the packages without deducting on Rs. 150/- on account of warranty. Once the law is very clear that only abatement is allowed to be deducted from retail sale price, no other deduction can be allowed. Thus, the argument of there being two contracts within a composite contract do not come to the aid of the appellant. It is noteworthy that the final consumer or their purchaser ELCOT does not have the option to buy only TV set and to not take the warranty. Also TV set with warrnaty was required to be given by one supplier and there was no provision that TV set should be provided by one supplier and warranty given by another person.
4.2 As per the definition of retail sale price as mentioned above, it includes freight, transport charges, commission payable to dealers and all charges towards advertisement, delivery, packaging, forwarding and the like. Thus, it will be seen that even the retail sale price includes components like transportation, commissions, advertisement etc on which service tax is payable. Thus, legislature took a conscious decision to charge both service tax and excise duty on these components, Regarding the appellants submission that warranty is not specifically mentioned, it is to be noted that this is a inclusive definition and warranty shall be covered in the phrase and the like.
4.3 Under section 4A, the retail sale price is the maximum price at which the goods may be sold. It is not the actual sale price of goods which will be different in most of the cases. Thus, if the assessee is recovering Rs. 150/- after one or two years, it does not help the assessee and the concept of retail sale price will apply. Ld. A.R. relied on following case laws in this regard:
(i) Hinudustan Coca-Cola Beverage P. ltd. Vs. CCE[2006(199) ELT 718 (Tri-Del)]
(ii) Gujarat Goldcoin Ceramics Ltd. Vs. CCE[2007(216) ELT 527(Tri-ahmd)] 4.4 Appellant has quoted certain case laws to show that excise duty and service tax cannot be levied simultaneously. Regarding Ericsson India Pvt. ltd. Vs. CCE(supra). He submitted that the appellant had imported several components and procured certain indigenous components which were then assembled and installed to form Transmissin Apparatus for Radio Telephony. Thus on the same activity of assembly and installation, the department was asking for excise duty and service tax separately. As there was no other activity involved, the Tribunal held that both cannot be charged. In the present case, the component of warranty of Rs. 150/- is very small part of the goods worth Rs. 2197/- and hence the case law is not applicable. The appellant also refers to Osnar chemicals Pvt Ltd. Vs. CCE (supra), in this case, the assesse was carrying out mechanical mixing of Bitumen with other additives at site which is used in road construction and the question was whether the process amounted to manufacture. The appellant was already paying service tax on this acivity under Business Auxiliary Service as the process did not amount to manufacture. He submitted that the legal position was that during the job work, if a process amounted to manufacture then excise duty is payable and if it does not amount to manufacture, then service tax is payable under Business Auxiliary Service. Thus as per law both Central Excise duty and service tax cannot be charged on the same activity of job work and it was so correctly held by Tribunal and upheld by High Court. This case law is not applicable to the present case as there is no job work involved. Regarding the case law relied upon by assessee of Tranformers and Electricals Kerala Vs. CCE(supra), He submits that the said case law pertain to payment of service tax on design and engineering, erection and installation under Consulting Engineer Service and is not relevant to the present case.
4.5 The case laws relied upon by the assessee of Mcnally Bharat Engg. Co. Ltd(supra) pertained to inclusion of erection and installation charges of machinery in Assessable Value determined under Section 4 of Central Excise Act and is not applicable to the present case.
4.6 He relied upon the case law of Godrej & Boyce Mfg Co Vs CCE[2011(273) ELT 585(Tri. Mum). In this case, the appellant were manufacturer of Refrigerator and Washing machines which were leviable to duty on the basis of retail sale price. The assesee was recovering optional service charges and rust proof protection charges collected over and above the MRP. The appellant was issuing two different invoices to their dealers-one for the sale of the refrigerator/washing machines and another for OSC/RPP. However, the dealer were issuing a composite invoice to customer for sale price plus OSC/RPP. Also, if a Customer did not want to opt for OSC/RPP, the customer could file a refund claim for the same subsequent to the same. The Tribunal held that since the goods have sold over and above the MRP, the OSC/RPP are includible in the Assessable value. Regarding the limitation, he submitted that for the period prior to the SCN with respect to purchase order dated 8/8/2006 and 8/12/2006 the assessee was paying duty on full MRP minus abatement. However, for the subsequent period, the assessee started taking deduction of Rs. 150/- towards warranty charges. There was no provision for deductions under Section 4A. Since Asseessee was paying excise duty on warranty charges earlier, they should have approached the Department for clarification or at least intimated the department. However, the assessee chose not to do that and took a wrong deduction with intention to evade payment of duty. Thus, extended period is invokable in this case.
5. We have carefully considered the submission made by both sides and perused the record.
6. The issue to be decided by us is whether warranty charges can be allowed to be deducted from the MRP for the purpose of valuation under Section 4A. There is no dispute by both the sides that valuation of the CTVs sold by the appellant to the Tamil Nadu government enterprise M/s. ELCOT is under section 4A of Central Excise Act, 1944. The appellants claim is that the warranty charges which is payable at subsequent stage of sale is not part of the retail sale price whereas the same is service independently on which the service tax also been paid. Since the valuation is governed by Section 4A it is necessary to read the said Section to ascertain what are all elements liable to be included in the maximum retail price. The section 4A is therefore reproduced below:
SECTION [4A. Valuation of excisable goods with reference to retail sale price. (1)?The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the [Legal Metrology Act, 2009 (1 of 2010)] or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette.
(3) The Central Government may, for the purpose of allowing any abatement under sub-section (2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods.
[(4) Where any goods specified under sub-section (1) are excisable goods and the manufacturer -
(a) removes such goods from the place of manufacture, without declaring the retail sale price of such goods on the packages or declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture, then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section.
Explanation 1. For the purposes of this section, retail sale price means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale :
Provided that in case the provisions of the Act, rules or other law as referred to in sub-section (1) require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly.
Explanation 2. For the purposes of this section, -
(a) where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale prices shall be deemed to be the retail sale price;
(b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price;
(c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.] From the reading of above 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 1/3/3006 as amended from time to time. From the subsection (2) it 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, commision payable to dealer and all charges towards advertisement, delivery, packaging forwarding and the like. This clearly shows that the price at which the goods is sold to the ultimate consumer is the retail sale price and the same should be affixed on the package of the goods. In the present case though the total retail sale price was affixed on the packages of CTVs but the appellant claimed the deduction from the said retail sale price on account of warranty charges. As per the definition of retail sale price when all the elements are includible in the RSP no any deduction can be allowed. The objective of allowing the abatement is that all the elements which not to form part of the assessable value should stand deducted by way of abatement. Therefore in the case where valuation is done under Section 4A, except abatement no further deduction is allowed. In the definition of retail sale price, under the inclusion clause, warranty charges are not specifically mentioned but all the charges even though not specifically mentioned shall stand included in the retail sale price, therefore the deduction on account of warranty charges cannot be allowed from maximum retail sale price. In the definition after mentioning the specific charges it is also mentioned and the like this clearly shows that not only the charges explicitly mentioned in the definition are includible but also other like charges are also includible. It clearly means that all the charges are includible in the retail sale price at which the good is sold to the consumer. If the contention of appellant is accepted regarding the deduction of warranty charges then likewise there are many more heads of charges which can also be claimed for deduction. To avoid any such sort of interpretation, the legislature had enacted section 4A whereunder the valuation of consumer goods was made simplified, according to which, at whatever price the goods are sold to the consumer that price minus abatement as specified under the notification shall be the assessable value therefore there is no scope for any deduction other than abatement for the purpose of valuation under Section 4A. In the present case the 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 appellants declaration itself the retail sale price includes the warranty charges. If 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. The Ld. Counsel has heavily relied upon the various judgments which are either related to sale tax or income tax and made a submission that the price can be apportioned on retail sale price and warranty charges. We do not agree with that submission of the Ld. Sr Counsel on the ground that all those judgments are based on the legal provision in the respective act and rules of income tax and sales tax. However in the present case, the valuation is under Section 4A, which is self contained provision for the purpose of valuation of goods for charging excise duty and as per Section 4A no apportioning of different charges was provided, therefore the ratio of the judgments related to sales tax and income tax cannot be borrowed in the present case. We find that the even as per Section 4 of Central Excise Act, 1944 the transaction value amongst other charges includes warranty charges also In this Regard it is pertinent to go through the definition of transaction value as provided under Section 4 which is reproduced below:
transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.] From the above definition of Transaction value the warranty charges is also includible in the assessable value, this shows that legislators have clear intention that for the purpose of charging excise duty the warranty charges should be included in the assessable value. If we compare the valuation under Section 4 and 4A it can be seen that all the charges which are includible as per Section 4 in the transaction value all such charges plus the element such as dealer margin, retail margin, sales tax freight, etc are also included in the retail sale price and thereafter the only deduction which is permissible is the abatement as notified by the government from time to time therefore there seems to be no reason why a particular element out of many charges i.e. warranty charges should be allowed to be deducted.
The appellant submitted that on the warranty charges they have discharged the service tax for this reason also the warranty charges should be allowed to be deducted from retail sale price of CTVs. We do not agree with this submission of the appellant for the reason that the statutory provision made 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. In the present case the issue involved is whether the deduction on account of warranty charges can be allowed from the retails sale price under the provision of Section 4A of Central excise Act, 1944 herefore payment of service tax on the said warranty charges is not the issue before us. As regard the appellants submission on time bar, we observed that the 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. It is also observed that as per the price bid for the TV set to M/s. ELCOT the MRP shown is Rs. 2197/- which includes the basic cost of Rs. 1682, warranty charges of Rs. 150, Excise duty of Rs. 235.84 and freight and handling charges of Rs.130/-. From this it can be seen that the 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 appellants submission that the demand being time bar is not tenable. In view of our above discussions, we do not find any merit in the Appeal. Hence, the impugned order is sustained and Appeals are dismissed.
(Order pronounced in court on__________) P.K. Jain Member (Technical) Ramesh Nair Member (Judicial) sk 27