CESTAT Chennai Quashes Excise Duty Demand Against Wipro Over TN Govt’s Free Laptop Scheme
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, has set aside an excise duty demand raised against Wipro Limited, ruling that the company’s supply of laptops to the Tamil Nadu Government for free distribution to school students under a welfare scheme could not be treated as a commercial sale. A Division Bench comprising Judicial Member P. Dinesha and Technical Member M. Ajit Kumar held that the supply of laptops to the Electronics Corporation of Tamil Nadu (ELCOT) was made under a government initiative aimed at promoting digital literacy among students, and hence, the valuation norms applicable to retail sales under Section 4A of the Central Excise Act, 1944, did not apply.
The dispute originated from Wipro’s supply of over 4,600 laptops to ELCOT between July and December 2012. These laptops were part of the Tamil Nadu Government’s flagship free laptop distribution scheme for school and college students. Wipro had discharged excise duty on the actual transaction value—the price charged to ELCOT. However, the excise department contended that since the laptops were capable of being sold in the open market, they should have been assessed on the basis of their Retail Sale Price (RSP) and not on the transaction value, thereby demanding differential duty.
Rejecting the department’s claim, the Tribunal observed that the issue was no longer res integra (i.e., no longer a matter of doubt) as it had been conclusively settled by the Delhi Tribunal in the case of PG Electroplast Ltd., which dealt with the government’s free colour TV distribution scheme. In that precedent, it was held that supplies made to a state government for free distribution did not constitute commercial transactions and hence, were not liable for valuation under Section 4A. “The reasons for demanding the differential duty have already been answered by the Principal Bench in the above case (PG Electroplast), 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 Chennai Bench stated in its order.
Wipro had argued that ELCOT was a government agency executing a welfare program and not a retail or industrial buyer. The laptops were not intended for sale to consumers, nor was there any marketing activity involved. The Tribunal agreed with Wipro’s contention, emphasizing that there was no commercial motive or retail element in the transaction. The Bench further ruled that Section 4A, which mandates duty calculation based on the retail price of goods intended for sale, was inapplicable to the present case. The supply to the state agency under a welfare program did not fall within the ambit of a “retail sale” as contemplated under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.
Consequently, the CESTAT quashed the additional excise duty demand along with any associated penalties, affirming that the free distribution of goods under government schemes is a non-commercial activity and cannot be subjected to excise duty on retail value. The ruling provides significant relief not only to Wipro but also sets a strong precedent for similar cases involving supplies made to state governments under welfare initiatives.
Appearance
For Appellant: Advocate M N Bharathi
For Respondent: M Selvakumar, Authorized Representative
Cause Title: Wipro Ltd.v The Commissioner of GST & Central Excise
Case No: Excise Appeal No. 40803 of 2016
Coram: Judicial Member P. Dinesha, Technical Member M. Ajit Kumar
