CESTAT Quashes Excise Duty Demand Against Wipro Over Tamil Nadu Govt's Free Laptop Scheme

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in Chennai on Wednesday quashed the excise department's demand for additional duty from Wipro Ltd., ruling that the company's supply of laptops to the Tamil Nadu government for free distribution to students cannot be treated as a commercial sale and therefore cannot be taxed at retail price. 

A two-member bench comprising Judicial Member P Dinesha and Technical Member M Ajit Kumar said the case was covered by an earlier decision of the Delhi Tribunal in the PG Electroplast matter where it was held that that the free distribution of colour TVs to poorer sections on behalf of the government can't be called a commercial activity.

Subsequently, it quashed the additional tax demand against Wipro.

“The reasons for demanding the differential duty has been answered by the Principal Bench in the above case (supra) and hence, we are of the view that the demand upheld in the impugned Order-in-Appeal cannot sustain for which reason we set aside the same.”, the tribunal held.

The dispute arose from Wipro's supply of more than 4,600 laptops to the state-run Electronics Corporation of Tamil Nadu (ELCOT) between July and December 2012. The laptops were distributed free to school students under a state welfare programme. Wipro had paid excise duty on the actual transaction value that is the price charged to ELCOT. However, the tax department argued that the goods should have been valued based on their Retail Sale Price (RSP), which applies to items sold in the open market, and demanded additional duty.

Wipro maintained that ELCOT was a government agency, not a retail or industrial buyer, and that the laptops were never meant for sale to consumers. The department, however, said that ELCOT was an institutional csutomer and therefore liable to be taxed at a retail price. 

Rejecting the department's position, the tribunal ruled that Section 4A of the Central Excise Act, which requires duty to be calculated on retail price, did not apply because the transaction was not a commercial one, affirming Wipro's stance.

Case Title: Wipro Ltd.v The Commissioner of GST & Central Excise

Case Number: Excise Appeal No. 40803 of 2016

For Appellant : Advocate M N Bharathi

For Respondent: M Selvakumar, Authorized Representative

Click here to read/download order