ORDER
J.H. Joglekar, Member (T)
1. The respondents manufactured textile machinery. They had collected erection and commissioning charges which fact was noted by the Department at a later date. A show cause notice was, therefore, issued on 21-4-1989 for the period December, 1983 to June, 1988 proposing to levy duty such charges collected on the contention that charges actually were warranty charges includible in the assessable value. The Collector in his order dated 19-4-1990 held that such charges were not collected from all the buyers and that warranty was extended by the assessees even where the buyer had not paid such charges. Holding that no benefit had accrued to the manufacturer and holding that it was not established that assessee had charged any extra charges for warranty service, the Collector dropped the proceedings giving rise to the present appeal before us.
2. We have heard Shri M. Ali, JDR for the Revenue and Shri Rajiv Pathak, Divisional Manager for the Assessees.
3. Shri Ali referring to the certificate of warranty highlighted the contents of Paragraph 19 thereof. He stated that where the buyer did not pay the charges the warranty ceased to have force. In other words performance under warranty was conditional upon buyer making such payment. He relied upon the judgment of the Supreme Court in the case of M.R.F. Limited – 1995 (77) E.L.T. 433 (S.C.) whereby the warranty charge was not held as admissible deduction. Shri Pathak, on the other hand, submitted that where buyers were repeated buyers, they did not need the assistance of the assessee to erect machinery. He said that about 50% of the buyers undertook erection on their own. Referring to last line of Clause 19 of the certificate of warranty he stated that in almost 80% of those buyers who did not opt for erection by the assessee, the assessee’s Company continued to extend the benefit of warranty.
4. We have carefully considered the submissions made by both the sides. Clause 19 of the certificate of warranty reads as under :-
“That the erection and commissioning of machine shall be done under Supervision of our engineer/supervisor and in case the purchaser does not opt for the same, the warranty shall cease to have any effect and it shall ipso facto come to an end unless expressly agreed by us in writing.” (emphasis supplied)
The first part of the clause seems to support the case of the Revenue but the second part seems to negate the claim made in the appeal memorandum that erection and commissioning charges were only stated in different name for the warranty charges. This claim does not sustain in view of the categorical statement made by the assessee’s Representative that in majority of the cases where buyers had not opted for erection by the Assessee Company, the benefit of warranty had been extended. Even otherwise, it was fairly conceded by the Departmental Representative that where such charges are collected the Assessee Company would have to spend money on labour and /or technical expert supervision by the Assessee Company. In such a case, the charge that entire erection charges would be includible was warranty charges would not sustain.
5. On perusal of the condition of warranty and after hearing the submissions made, we find that the Revenue has not been able to substantiate their allegation that the charges were infact warranty charges. We, therefore, uphold the Collector’s order and reject this appeal.