Case: Voltas Limited Vs. Union of India

the Company is entitled to such deduction. The submission is entirely devoid of any merit for more than one reason. In the first instance, the claim that the Company did not produce enough documents to support the claim of deduction of maintenance service charges is incorrect. The Company filed revised price list and the price lists demonstrated the amount charged towards maintenance service contract from the customer. In addition to the price lists, the Company filed certificate in respect of maintenance service dated February 6, 1984 issued by the Chartered Accountant in support of the claim. The Assistant Collector not only did not reject the certificate but accepted the same in respect of deduction sought by the Company on account of additional tax on sales tax. Shri Desai made a faint attempt to urge that the production of certificate by Chartered accountant is not sufficient documentary evidence to substantiate the claim. The submission is not correct. After the decision of the Supreme Court in Bombay Tyres International Limited delivered on October 7, 1983, the Government of India, Ministry of Finance issued circular dated December 3, 1983 to all the Collectors of Central Excise. The circular, inter alia, recites that the Assistant Collectors and the Collectors would be required to take up large number of cases for settling the claims arising out of decision of the Supreme Court. The Circular states that it would be very difficult to verify the claims of deductions with reference to each and every voucher/bill and, therefore, the manufacturers should be requested to give a consolidated statement explaining the expenses incurred and which statement should be duly verified and certified by the Chartered Accountant. The Collectors were directed to accept such statements without going into much details with regard to the verification of the individual/voucher etc. The assistant Collector in the present case accepted the statement duly verified and certified by the chartered Accountant of the Company and in fact granted relief of deduction under the heading of additional tax on sales tax. It is, therefore, futile for Shri Desai to suggest that reliance on the certificate issued by the Chartered Accountant was not justified and the certificate itself is not suffice to establish the claim. It also cannot be overlooked that the Assistant Collector had not declined relief on the ground of insufficiency of the material. The Assistant Collector turned down the claim on the basis that the maintenance service charges amount to after-sale service for promoting the article and, therefore, should be included while assessing the value of the article for the purpose of excise duty. The Assistant Collector never doubted or disputed the correctness of the statement made in the price list or in the certificate issued by the Chartered Accountant. In our judgment, the Assistant Collector was clearly in error in not granting deduction in respect of maintenance service charges recovered by the Company in respect of manufactured articles and the order of the Assistant Collector on this count cannot be sustained.( 9 ) SHRI Andhyarujina then submitted that the conclusion of the Assistant Collector that site service charges also cannot be deducted while determining the assessable value is erroneous. The submission is correct and deserves acceptance. Before examining the submission, it is necessary to understand what service is rendered by the Company in respect of contract for site service. The Company carries out several functions to ensure that the Units are maintained property at site by the dealer. The Company provides design assistance to the dealer for special type of installation. The Company also inspects the actual installation of the Units and also helps the dealer in solving special problems encountered after installation. The site service also includes attending to customers complaints received directly by Voltas in respect of Units serviced by the dealer. The Company sells the air-conditioners/water coolers to recognised dealers on a principle to principle basis and the dealer fulfills the warranty obligations to its customers. The site services rendered by the Company are independent of the warranty obligations and maintenance service. The Assistant Collector did not furnish any reasons apart from those which were mentioned hereinabove for rejecting the claim for deduction in respect of maintenance charges to turn down this claim also. Shri Desai submitted that site service charges also should be included in the assessable value for the identical reasons which were urged in respect of maintenance service charges. In other words, the submission was that site service charges is nothing different from the services rendered under the warranty obligations. We are unable to find any merit in the submission. The warranty obligation does not require the Company to provide design assistance to the dealer for special type of installation or to inspect the actual installation. In our judgment, the site service charges are recovered by the Company for rendering special service for giving advice in regard to the manner of installation and the charges recovered for rendering such service cannot be included while determining the assessable value of the Unit. The customer is not bound to purchase the air-conditioner or water cooler from the company even though the design assistance for special type of installation is secured from the Company by payment of site service charges. In our judgment, the site service charges are required to be excluded while determining the assessable value of the article. The Assistant Collector was, therefore, in error in not excluding the maintenance service charges and site service charges while approving the revised price lists for the period commencing from May 19, 1980 and ending with December 29, 1983. Shri Desai made a brave attempt to submit the matter should be remitted back to the Assistant collector for re-consideration but we fail to appreciate why such course should be adopted, nor shri Desai could give a convincing answer. The matters are not remitted back to the Assistant collector for fresh consideration only because the Department so desires. In our judgment, there is no occasion whatsoever to grant such request.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]There is considerable merit in the submission of the learnedis not possible to accede to the submission of the learned counsel. As mentioned hereinabove, there is clear line of distinction between the obligations under the warranty and the obligations under the maintenanceis also clear from the perusal of the brochure that the warranty does not assure the customer of service machine during the period of repair and also requires the customer to produce the machine at the service station, while the facility of availability of service machine is available in terms of contract of maintenance of service. It is, therefore, futile for Shri Desai to urge that the services rendered under the warranty and under maintenance service contract are similar. The services are different and distinct and though the Company is bound to furnish warranty and the customer is liable to pay for the warranty charges, the maintenance service is purely optional. Shri Desai submitted with reference to decision of the Supreme Court in Bombay Tyres international Limited (A. I. R. 1984 Supreme Court 420) that the charges for other services after delivery to the buyer cannot be deducted and in support of the submission placed strong reliance upon the observation made by the Supreme Court in paragraph 51 of theis not possible to accede to the submission of Shri Desai that maintenance service offered by the company promote the marketability of the article and, therefore, should enter into its value. It was also not possible to appreciate the observation made by the Assistant Collector that the maintenance service charges are not deductible because the Supreme Court has expressly laid down that no other expenses except trade discount, excise duty and average freight will be deductible for the purpose of determining the value of the excisable goods. On the other hand in paragraph 57 of the judgment in the case of Bombay Tyres International Limited, it was specifically observed that the Supreme Court had considered only those claims of deduction as sought by the assessee in that case and the judgment is confined only to those items and no other head of expenses had been examined by the Supreme Court. In these circumstances, it was wrong on the part of the Assistant Collector to refuse to grant relief of deduction in respect of maintenance service charges and the order on this count cannot be sustained. Shri Desai in support of his submission that whatever charges are recovered by the Company during the warranty period shall be included in the price to be determined as assessable value, referred to the decision in the case of Collector of Central Excise v. Kelvinator of India Ltd. reported in 1988 (36) Excise Law Times 517 . We are unable to appreciate how the judgment supports the claim of the learned counsel. In the case before the Supreme Court after the free warranty of one year is over, the manufacturer offered a four year service contract only for the sealed system or parts of the refrigerators. The service offered was not free but on payment and the contract was not compulsory but optional. The Supreme Court held that since four year warranty service is optional and this is entered into after the date of sale, that was clearlyfacility and the charges cannot be included in the assessable value of the refrigerator. In our judgment, the decision of the Supreme Court instead of supporting Shri Desai goes against his submission that every item in respect ofservice is required to be included in the assessable value of thesubmission is notis, therefore, futile for Shri Desai to suggest that reliance on the certificate issued by the Chartered Accountant was not justified and the certificate itself is not suffice to establish the claim. It also cannot be overlooked that the Assistant Collector had not declined relief on the ground of insufficiency of the material. The Assistant Collector turned down the claim on the basis that the maintenance service charges amount toservice for promoting the article and, therefore, should be included while assessing the value of the article for the purpose of excise duty. The Assistant Collector never doubted or disputed the correctness of the statement made in the price list or in the certificate issued by the Chartered Accountant. In our judgment, the Assistant Collector was clearly in error in not granting deduction in respect of maintenance service charges recovered by the Company in respect of manufactured articles and the order of the Assistant Collector on this count cannot besubmission is correct and deservesare unable to find any merit in the submission. The warranty obligation does not require the Company to provide design assistance to the dealer for special type of installation or to inspect the actual installation. In our judgment, the site service charges are recovered by the Company for rendering special service for giving advice in regard to the manner of installation and the charges recovered for rendering such service cannot be included while determining the assessable value of the Unit. The customer is not bound to purchase theor water cooler from the company even though the design assistance for special type of installation is secured from the Company by payment of site service charges. In our judgment, the site service charges are required to be excluded while determining the assessable value of the article. The Assistant Collector was, therefore, in error in not excluding the maintenance service charges and site service charges while approving the revised price lists for the period commencing from May 19, 1980 and ending with December 29, 1983. Shri Desai made a brave attempt to submit the matter should be remitted back to the Assistant collector forbut we fail to appreciate why such course should be adopted, nor shri Desai could give a convincing answer. The matters are not remitted back to the Assistant collector for fresh consideration only because the Department so desires. In our judgment, there is no occasion whatsoever to grant such request.