ivil Appeal Nos 727 and 962 74 of 1988 Appeal Under Section 35Lb of the Central Excise and Salt Act 1944 from the order dated 301187 and 201187 of the Customs Excise and Gold Control Appellate Tribunal New Delhi in Appeal No 2856 1856 1920 193187 A in order Nos 775 749 to 76187
Kuldeep Singh Additional Solicitor General
AK Ganguli Mrs Sushma Suri and K Swami for the Appellant
FS Nariman Ravinder Narain AK Verma and DN Misra for the Respondents
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
These appeals arise under section 35Lb of the Central Excises  Salt Act 1944 hereinafter called the Act 
The respondents herein Ms Kelvinator of India Ltd in these appeals manufacture refrigerators
They market these through their four exclusive wholesale dealers namely Ms Gem 658 Ms Leonard Ms Expo Machinery and Ms Tropicana
The respondents gave one year warranty for the complete refrigerator and all parts thereof except the light bulb and the crisper glass
During this warranty period they provide free repair and replacement for defects in material and workmanship under normal use and service
This free service is available only within the municipal limits of the area served by an office of the wholesale dealer of the authorised dealer from whom the refrigerator is originally purchased
The respondents include the cost of this one year warranty in the sale price as well as assessable value of the refrigerator
After the free warranty period of one year is over the respondents offer a four year service contract only for the sealed system or parts thereof
This contract is not free
It is on payment basis
Charges for it during the material period 10481 to 30686 in Civil Appeals Nos
962 75 of 1988 varied from Rs 300 to Rs450 per refrigerator
It is a fact that these four dealers enter into this contract with the respondents
The final consumer in turn enters into the service contract with the dealer from whom he buys his refrigerator
The service is rendered by the respondents and the entire contract money accrues to them
It is on evidence that during the material period the four dealers referred to hereinbefore entered into service contract in respect of a total of 91 of their purchases
The remaining 9 did not enter into such contract
This is optional
The Assistant Collector by his order dated 18th August 1986 held that four year service charge is includible in the value of the Refrigerator for the purpose of assessment of central excise duty under section 4 of the Act
The Assistant Collector further held that for all intents and purposes this charge was not optional as it was not exercised only in respect of 9 of the sales
The Assistant Collector relied on the decision of this Court in Union of India and others etc
vs Bombay Tyre International Ltd etc
  where it was held that after sale service charges could not be deducted from the assessable value
The Assistant Collector confirmed the demands totalling Rs17406832632 against the respondents in Civil Appeals No 962 74 of 1988 and Rs707535 in Civil Appeal No 727 of 1988
The respondents herein filed an appeal before the Appellate Collector
The Appellate Collector upheld the decision of the Assistant Collector
There was an appeal to the Tribunal and the Tribunal held that the optional service charge during the second and third year after the expiry of the first year warranty period was not includible in the assessable value
The Tribunal allowed the appeals of the assessee with consequential relief
Hence these appeals come to this Court
659 The point involved in these appeals is whether the four year service contract charge is includible in the value of the refrigerators for the purpose of assessment of Central Excise Duty under section 4 of the Act
It was found as a fact by the Tribunal that after the free warranty period of one year is over the respondent herein offer a four year service contract only for the sealed system or parts thereof
This contract is not free
It is on payment basis
The contract is not compulsory and the four dealers entered into service contract in respect of 91 of their purchase
They did not make the contract for the remaining 9
It is also not necessary that the contract should be made right at the time of purchase of the refrigerator from the respondents
In fact it was found as a fact that some time contract was made only in less than 10 of the sales
For the remaining 81 of the purchases the dealers took time from one week to over six months from the date of purchase
It was explained by the respondents that depending upon the demand pattern in a particular area the dealer purchased about 10 of the refrigerators straightaway with the service contract for the remaining purchases he exercised the option later as and when the dealer anticipated further demand from his customers
The Tribunal on an analysis of the evidence came to the conclusion that it was after sale service and it was optional
Therefore such service charges were not includible in the assessable value of the respondents herein
The principle under which these will be includible has been laid down in Union of India and others
vs Bombay Tyre International Ltd supra where Pathak J as the learned Chief Justice then was inter alia observed as follow  expenses incurred by the assessee upto the date of delivery on account of storage charges outward handling charges interest on inventories stocks carried by the manufacturer after clearance charges for other services after delivery to the buyer namely after sales service and marketing and selling organisation expenses including advertisement expenses cannot be deducted
It will be noted that advertisement expenses marketing and selling or organisation expenses and after sales service promote the marketability of the article and enter into its value in the trade
Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate the expenses incurred by the assessee upto the date of delivery under the aforesaid heads cannot on the same grounds be deducted
660 But the assessee will be entitled to a deduction on account A of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold
The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery
 This aspect was later clarified by this Court in Assistant Collector of Central Excise and others vs Madras Rubber Factory Ltd and others  where Bhagwati CJ at page 562 of the report observed as follows
Interest on finished goods from the date of the stocks are cleared till the date of the sale was disallowed by the Assistant Collector Kottayam
This head has again been urged for our consideration as a proper deduction for determination of the assessable value
As quoted in our judgment in Union of India and Ors
vs Bombay Tyres International Ltd supra we have held that expenses incurred on account of several factors which have contributed to its value upto the date of sale which apparently would be the date of delivery at the factory gate are liable to be included
The interest on the finished goods until the goods are sold and delivered at the factory gate would therefore necessarily according to the judgment in Bombay Tyres International case supra have to be included but interest on finished goods from the date of delivery at the factory gate upto the date of delivery from the sales depot would be an expense incurred after the date of removal from the factory gate and it would therefore according to the judgment in Bombay Tyres International case supra not be liable to be included since it would add to the value of the goods after the date of removal from the factory gate
We would therefore have to allow the claim of MRF Ltd as above
 It was mentioned before us by the learned Additional Solicitor General that this judgment is under review
The Tribunal in its judgment herein has observed as follows We have given enough facts in paragraph 2 above to show that the four year service contract charge in the present was 661 not compulsory one
As to why the appellants  buyers chose not to enter into such contract only for about 9 of the purchases and not more is a matter between the manufacturer and his customers
The percentages may look small but the statement of sales filed before us for the five year period 1981 86 shows that the number of Refrigerators in respect of which the option was not exercised was in thousands ranging from over 18000 to over 39000 per year
We find no force in the department s pleading that the service charge for all intents and purposes was a compulsory one
As to what machinery the appellants devised for extending this service is not material
If any customer did not like to have the service there was no compulsion on him to go in for it
That is the important thing
Once we reach the conclusion that the post warranty service activity could not be subjected to excise it ceases to be material that 91 of the customers had opted for the service contract
The ordinary or normal price referred to in section 41a can take in the costs upto the stage of factory gate and not beyond as held by the Hon ble Supreme Court
 The Tribunal also observed that the respondents herein offered the four years service by a stamped endorsement on their sale invoice itself it did not mean that the subsequent exercise of option by the buyer related back to the date of purchase itself
It was also found that there was no evidence to conclude that the service contract was a facade to split the true value of refrigerators into taxable and nontaxable components
In that view of the matter the Tribunal set aside the order of the Collector of Central Excise Appeals and allowed the appeals
The contract for four years warranty service was optional which was entered into later on
This is clearly after sale facility and cannot be includible in the assessable value of the refrigerators
In the aforesaid view of the matter the Tribunal was right in the view it took
These appeals fail and are accordingly dismissed
GN Appeals dismissed


Summary:
A dispute between different branches of an industrialist family culminated in the instant special leave petition
This Court with a view to speedily resolve the dispute between the parties and keeping in view the interest of the workers employed in the Kamani Tubes Ltd KTL
in August 1984 persuaded a retired Judge of the Supreme Court to mediate between the parties
In August 1985 KTL stopped production
During the discussions before the Mediator on July 2 1986 it was decided that the different groups of the family would try to find a willing buyer for 90 shares held by them
At the same time the Mediator permitted the workers to frame a scheme on their own for restarting the factories
In July 1987 the Kamani Employees Union KEU instituted a petition seeking Court s directions for the sale of KTL shares to KEU and for expeditious consideration of the scheme submitted by the workers for the revival of the factories
In pursuance of the directions of the Court the scheme was scrutinised by the Board for Industrial and Financial Reconstruction BIFR constituted under the 
The Board after consultation with various agencies including the Industrial Development Bank of India sanctioned the Workers  Scheme on 6th September 1988 which was placed before the Court for further orders
At this stage one of the parties Shri Ashish Kamani submitted an alternate scheme
While stamping the Workers  Scheme with the imprimatur of the Court it was
PG NO 123 PG NO 124 HELD I When the two Schemes are viewed in juxtaposition there is no manner of doubt that the scheme presented by Shri Ashish Kamani appears in a rather poor light
The entire scheme is wrapped in imponderables and is built on a non existant foundation
134G 135B 135C 2 Section 18 of the inter alia provides for the reduction of the interest or rights of the shareholders in the sick industrial company to the extent necessary for the reconstruction revival or rehabilitation of the sick company and further provides for the transfer of its shares at their face value or intrinsic value to the employees of the sick company
136F G 3 The provision for transferring the shares to the employees makes manifest the intention of the legislature to encourage the employees to take over the sick units and to clothe the competent authority with power to direct the transfer of the shares to the employees in this behalf
Thus the authority and competence of the BIFR to issue a direction for the transfer of the shares to the employees has the full backing Of the benevolent legislation enacted especially in order to restructure or revive the sick undertakings
137A B 4 The BIFR has rightly reached the conclusion that the intrinsic value of the KTL share is zero and the Board was perfectly right in directing the members of the Kamani family to transfer the shares at the rate of Re 1 per share in order to effectuate the Scheme for revival of KTL
137E G 5 Since the Scheme is being framed under the statutory authority and directive in order to revive the industry in the larger public interest and inasmuch as there is a necessary declaration contained in Section 2 of the Act which attracts the applicability of article 31C Of the Constitution the decision rendered by the BIFR is unassailable and unimpeachable
138D 6 The Scheme has been framed as per the direction and mandate of this Court in exercise of its inherent constitutional jurisdiction under article 142 of the Constitution and there ore the framing of the Scheme and the enforcement of the sanctioned scheme does not detract from or have any impact on the obligation incurred by the guarantors in regard to the debts incurred by KTL in past
The concerned Banks were and are bound by the directives and mandates
138E F PG NO 125 7 Notwithstanding any order that may be secured by party from any other forum the Scheme shall be implemented in obeisance to the judicial command embodied in this order and that in a there is any problem it may be brought to this Court for seeking appropriate directions instead of resorting to other forums to impede the implementation of this socially and economically wholesome scheme
139C D