The Hindu Business Line : Colour televisions that caught the taxman's eye

Our rash faults make trivial price of serious things we have. So says the King in All's Well That Ends Well, Act V, scene III. As if in converse, it is taxman's wont to make a serious issue of trivial price-related things, especially in excise matters, as no rash faults but deliberate exercises.

Take, for instance, the Viacom Electronics Pvt Ltd case that came up before the New Delhi Tribunal not long ago. Viacom and Dixon Utilities & Exports Ltd are manufacturers of television (TV) sets. It manufactured and supplied colour TVs to Baron International Ltd, which in turn marketed the TVs through dealers.

For the purpose of valuation under Section 4A of the Central Excise Act, Viacom declared the MRP (maximum retail price) affixed on the sets as RSP (retail sale price), and indicated prices of the TVs, size-wise. It also indicated that RSP was for the U/E (under exchange) basis. For example, RSP of 14" TV was declared as Rs 4,990 (U/E).

The taxman said that the `exchange price' could not be treated as MRP, and insisted that Viacom add Rs 4,000 to the values it had arrived at. "The higher prices so adopted were the highest of the sale prices for each size of the TV in the retail market."

Viacom approached the Commissioner, and said that in addition to selling TVs under the exchange scheme, there were normal sales too. "It was submitted that since no objection could be raised to such `clean' sales, the MRP for those goods should be adopted for the purpose of valuation of identical TVs cleared under the exchange scheme," argued the company.

The Revenue also conceded that, for two sizes of TVs, the difference between RSP (U/E) and `clean' sales MRP was Rs 2,000 or less. Of relevance was the representation by the Consumer Electronics and Television Manufacturer Association (CETMA) to the Chairman of the CBEC that the average price for old TVs should be adopted for loading the RSP of TVs sold on exchange. That letter had also indicated that an amount of Rs 2,000 was the average price of second-hand TVs in the Mumbai market.

Viacom, therefore, submitted before the Commissioner that the MRP of exchange sale TVs be taken as printed RSP + Rs 2,000 and that duty liability be determined accordingly. "The Commissioner accepted this proposal, particularly since it was to the Revenue's advantage."

Yet, the case travelled to the Tribunal, where the main objection of the Revenue was the determination of RSP by the addition of Rs 2,000. The amount was `grossly inadequate', said the taxman. To support its view, the Department pointed out that a Baron group company, Sprite Electronics Pvt Ltd, was issuing uniformly bills for Rs 3,500 in regard to each old TV to the dealers. "A bill for another Rs 1,000 was being issued by Baron International Ltd," said the Department. Thus, the total was Rs 4,500 per set, which should appropriately be the amount to be added to the RSP printed on exchange TVs, to work out the correct MRPs of those sets, contended the Department.

Viacom submitted that adding Rs 4,500 would be grossly incorrect. The amount did not, in any way, represent the price of the old TVs received during exchange, it said. "If at all, it is the resale price of the old TV sets received during exchange sale," noted Viacom.

Another contention of the company was that since old TVs of many varieties were returned by the purchasers, only an average price could be taken for the purpose of determining the commercial value of those sets. CETMA's finding (Rs 2,000 as average value of old sets) had no evidence to the contrary from the taxman, it was pointed out.

Before resale, old sets required to be attended to by way of repair, refurbishing and so on, and warranty also was offered, said Viacom.

If, as the Revenue insisted, Rs 4,500 were added, the MRP so worked out would go much above the MRP of comparable `clean' sale identical sets, averred the company.

Also that, since the Revenue did not dispute the MRP of identical clean sale TVs, there was no ground for seeking assessment of exchange-TVs under a higher MRP. Archana Wadhwa and C. N. B. Nair, Members of the Tribunal, heard both the sides and said, "The Commissioner was right in holding that an addition of Rs 2,000 per TV set would be sufficient to obtain the correct MRP. There is no requirement to interfere with that finding."

But the taxman had another grievance: whether the price of woofer was includible. To his dismay, though, the Commissioner had found that woofer was not a part of TV, and that the same was cleared and sold separately.

To wrap, here is a quote of Muhammad Iqbal that should cause the taxman to ponder: "Ends and purposes, whether they exist as conscious or subconscious tendencies, form the warp and woof of our conscious experience."

Tailpiece

"Tomato, Rs 40 per kg?"

"That is, before they levy service tax on vegetable vending!"

http://Detaxification.blogspot.com

D. Murali

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