2005 (6) TMI 384 - AT - Central Excise

Tribunal sets aside interest, penalties, and emphasizes excluding financing charges in Central Excise case

The Tribunal allowed the appeals, setting aside the inclusion of interest in the assessable value and penalties imposed. It emphasized excluding financing ... Valuation - Demand & Interest - Cenvat/Modvat Issues:1. Inclusion of interest on advance received in the assessable value of goods.2. Imposition of penalties under various provisions of Central Excise law.3. Adjustment of credit on inputs against the duty paid.Issue 1: Inclusion of interest on advance received in the assessable value of goodsThe case involved appeals against orders related to the inclusion of interest on advances received in the assessable value of goods supplied. The appellants, manufacturers of car air-conditioners and radiators, received advances from a buyer for the supply of dies and moulds used in manufacturing goods. The Commissioner confirmed a demand under Section 11A of the Central Excise Act, 1994, for including the interest in the assessable value. The appellants argued that they had amortized the cost of the dies and moulds, following instructions and Central Excise law, and that financing charges were excluded from the transaction value by the legislature. The Tribunal agreed with the appellants, stating that there was no legal provision to add interest accrued on the advance to the assessable value. The duty demand was not sustainable, and penalties imposed were deemed unjustifiable. The Tribunal ordered the adjustment of credit on inputs and a refund to the appellants.Issue 2: Imposition of penalties under various provisions of Central Excise lawThe appellants challenged the penalties imposed by the Commissioner, including Cenvat credit recovery, duty payment under invalid documents, and personal penalties. The Tribunal found that as the interest on the advance was not includible in the assessable value, the penalties based on this inclusion were not justified. The Tribunal also noted the evidence of payment provided by the appellants, leading to an adjustment in the amount owed and the confirmation of duty appropriation. The penalties imposed under different provisions of the Central Excise law were deemed not justifiable, and adjustments were ordered accordingly.Issue 3: Adjustment of credit on inputs against the duty paidThe appellants raised a factual error regarding the payment of duty on notional interest, which was acknowledged by the Department. The Tribunal considered this evidence and ordered the adjustment of the credit on inputs against the amount already paid by the appellants. The Tribunal confirmed the appropriation of duty and directed the refund of the balance amount to the appellants. The adjustment and refund were based on the evidence provided by the appellants and the acknowledgment by the Department.In conclusion, the Tribunal allowed the appeals, setting aside the orders related to the inclusion of interest in the assessable value and the penalties imposed. The Tribunal emphasized the exclusion of financing charges from the transaction value and the adherence to instructions and Central Excise law in determining the assessable value of goods. Adjustments and refunds were ordered based on the evidence and acknowledgments provided during the proceedings.