1. These appeals are against the judgment of the Customs, Excise and Gold (Control) Appellate Tribunal dated 23rd February, 1999.
2. Briefly stated the facts are :-
The appellants are manufacturers of heavy electrical equipment and machinery which they make as per the specific requirements of customers. The Terms and Conditions of sale to the customer contains a warranty clause which provides for free replacement of defective parts within a period of 12 months to 18 months. At the time of sale the appellants charge 2.5%, of the factory cost, as a "complaint reserve". This element is added to the price. It is not disputed that the excise duty is paid on the total amount charged to the customer including this element of 2.5% complaint reserve. At a subsequent stage, on some occasions, parts have to be replaced by the appellants during the warranty period. The question for consideration is whether excise duty is payable on the parts which are replaced during the warranty period. Both the Collector and the Tribunal have held that excise duty was payable. Hence these appeals.
3. It has been submitted that the part has to be replaced free of cost during the warranty period. It is submitted that the sale price of the machinery includes the price of the part which is subsequently being replaced. It is submitted that there cannot be double levy of excise on the same part. We see no substance in this submission. The price charged for the machinery may include the element of 'complaint reserve'. However, at that time it is not known whether there will be any requirement to replace any part. In many cases, parts are not required to be replaced. When parts are not replaced the component of 'complaint reserve' is not returned to the customer. This shows that so far as the customer is concerned the total amount paid, including the component towards 'complaint reserve' is price for the machinery.
4. It is next submitted that the value of an assessable goods can be zero. It is submitted that when a part is replaced under a warranty to the assessee the value is zero. It is submitted that as the value is zero, no excise duty should be payable on that part. We are unable to accept this submission also. In order to promote sales manufacturers and dealers very often offer incentives e.g. supply of free T.V. or some other equipment or goods. One of the incentives offered, is a warranty to replace a part within a particular period. Merely because manufacturers and dealers choose to offer such incentives does not mean that a good which is otherwise excisable, should be exempted from paying excise duty. When offering the incentive, the manufacturer or dealer is choosing to take upon himself the cost of that good. So far as the Revenue is concerned, that good remains excisable.
5. In this view of the matter, we see no infirmity in the judgment of the Tribunal. We, therefore, see no reason to interfere. The appeals stand dismissed. There will be no order as to costs.