K.L. Rekhi, Member (T)

1. This is an appeal filed by the department. The basic point of dispute in this appeal is whether technical service charges recovered by the respondents from their customers, but not disclosed to the department, were includible in the assessable value of computers sold by the respondents, for the charge of Central Excise duty.

2. Relying on paragraph 49 of the Hon'ble Supreme Court's judgment in the case of M/s. Bombay Tyres International Limited -1983 (13) ELT1896 (SC), in which it was held that after-sale-service charges were includible in the assessable value under Section4 of the Central Excises and Salt Act, 1944, the Assistant Collector decided that the technical service charges collected by the respondents were to be included in the assessable value. And since the respondents had disclosed to the department only that part of the contract with their customers which related to the sale of computer hardware, kept back the other part relating to the technical service charges and software etc. supplied by the respondents in connection with the hardware and issued separate bills for the technical service charges and software from their head office, the Assistant Collector held the respondents guilty of suppression of facts, invoked 5 years' time limit for demanding duty and confirmed demands for differential Central Excise duty amounting to Rs. 99,60,141.89 for the entire amount of technical service charges recovered during the period from March 1982 to 16.3.1985. The Assistant Collector also imposed a penalty of Rs. 250/- on the respondents under Rule 173Q of the Central Excise Rules, 1944. The Collector (Appeals) set aside the Assistant Collector's order holding that technical service charges were not expenses incurred by the respondents in manufacturing and marketing of computers but were for optional professional services rendered by the respondents to their customers in using the computers and hence the Supreme Court judgment in Bombay Tyres International Ltd. was not applicable. The department is now in appeal before us to have the Assistant Collector's order restored.

3. The department originally filed the appeal on the ground that the technical service charges contributed to enrich the value of the computers and gave to the article its marketability in the trade. Later, by means of the Misc. Application listed above, for admission of additional grounds, the department sought to say that the services were, in fact, rendered free by the respondents and the money realised separately from the customers in the name of the services was for warranty charges for the computers and for supply of software and language etc. which were a part of the computer system and that this was a dubious practice adopted by the respondents for recovering a part of the real value of the computers. The respondents opposed the department's application for additional grounds saying that the department was thereby trying to make out a completely new case. The respondents pleaded that the department should not be allowed to bring in a fresh charge three years after the issue of the original show cause notices. On careful consideration, we find that the department is not really trying to make out any new case. The case of the department has all along been that the technical service charges separately recovered by the respondents from customers, but not declared to the department, were a part of the assessable value of the computers. By the proposed amendment to the grounds of appeal, the department is only trying to pin-point that the technical service charges were mainly for warranty services which any manufacturer of sophisticated and costly gadgets like computers is duty bound to perform in the normal course of trade without charging anything for them. There is also nothing new in the documents tabled by the department in support of the additional ground. They are the respondents' own record - their price quotation and t