LexCOLLECTOR OF CENTRAL EXCISE, DELHI versus KELVINATOR OF INDIA LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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COLLECTOR OF CENTRAL EXCISE, DELHI
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v.
KELVINATOR OF INDIA LTD.
APRIL 20, 1988
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ISABYASACHI MUKHARJI ANDS. RANGANATHAN, JJ.]
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Central Excises and Salt Act, 1944: Section 4--Refrigerator-
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After-sale service facility-Optional four-year warranty service contract
on payment-Such charges not includible in 'assessable value' of
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refrigerator.
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The Respondents, manufacturers of refrigerators, give one year
warranty for the 1:omplete refrigerator and all parts thereof. During
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this warranty period, they provide free repair and replacement for
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defects in material and workmanship under normal use and service.
They include the cost of this one year warranty in the sale price as well
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as assessable value of the refrigerator.
After the free warranty period of one year, the respondents offer
a four year service contract only for the sealed system or parts thereof.
This contract is on payment which may vary from Rs.300 and Rs.400
per refrigerator. The dealers enter into contract with the Respondents,
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and the consumer in turn enters into contract with the dealer from
whom he buys his refrigerator. The servke is rendered by the Respon-
dents and the entire contract money accrues to them. Though the
contract is optional, 91% of Customers did enter into this contract, and
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only 9% did not.
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The Assistant: Collector held that the four year service charge is ·*
includible in the value of the refrigerator for the purpose of Central
Excise duty under section 4 of the Act. The Appellate Collector upheld
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the said decision. On appeal the Tribunal held that the said optional
service charge was not includible in the assessable value.
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These appeals by Revenue under Section 3SL(b) of the Act are
against the Tribunal's decision.
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Dismissing the appeals, this Court,
HELD: I. The contract for four years warranty service was
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optional which was entered into later on. This is clearly after-sale
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COLLECTOR OF CENTRAL EXCISE v. KELVINATOR [MUKHARJI, J .]
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facility and cannot be includible in the assessable value of the A
refrigerator. [ 661 GI
1.2 The Tribunal was right in the view it took·that the optional
service charge after the expiry of the first year warranty period was
not includible in the assessable value. It rightly observed that if any
consumer did not like to have the service, there was no compulsion on
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him to go in for it and once the conclusion is reached that 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
Tribunal also observed that the respondents ·offered ·the four year
service by ·a stamped endorsement on their sale invoice itself, but it did
not mean that the subsequent exercise of option by the buyer related C
back to the date of purchase itself and that there was no evidence to
conclude that the service contract was a facade to split the true value of
refrigerators into taxable and non-taxable components. [658H; 661D-FI
Union of India and Others etc. v. Bombay Tyre International
Ltd., [1984] 1 SCR 347 and Assistant Collector of Central Excise and
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others v. Madras Rubber Factory Ltd. and others, [19871 27 E.L.T.
553, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 727
and 962-74 of 1988.
Appeal Under Section 35L(b) of the Central Excise and Salt Act,
1944 from the Order dated 30.11.87 and 20.11.87 of the Customs
Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal
No. 2856, 1856, 1920-1931/87-AinOrderNos. 775, 749to761/87.
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Kuldeep Singh, Additional Solicitor General. A.K. Ganguli,
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Mrs. Sushma Suri and K. Swami for the Appellant.
F.S. Nariman, Ravinder Narain, A.K. Verma and D.N. Misra
for the Respondents.
The Judgment of the Court was delivered by
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SABYASACHI MUKHARJI, J. These appeals arise under
section 35L(b) of the Central Excises & Salt Act, 1944 (hereinafter
called 'the Act'). The respondents herein M/s. Kelvinator of India
Ltd. in these appeals manufacture refrigerators. They market these
through their four exclusive wholesale dealers, namely, M/s. Gem,
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SUPREME COURT REPORTS
[1988) 3 S.C.R. -(
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M/s. Leonard, M/s. Expo Machinery aod M/s. Tropicaoa. The respon-
dents gave one year warraoty for the complete refrigerator aod all
parts thereof (except the light bulb aod the crisper glass). During this
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