1991 (7) TMI 74 - HC - Central Excise

Court allows fresh determination on deductions, upholds rejection of interest claim

ADVANI OERLIKON LIMITED Versus UNION OF INDIA

ADVANI OERLIKON LIMITED Versus UNION OF INDIA - 1991 (55) E.L.T. 486 (Bom.) Issues Involved:1. Equalized freight deduction2. Insurance on goods in transit deduction3. Discounts and commissions deduction4. Interest on book debts deductionDetailed Analysis:1. Equalized Freight Deduction:The first deduction claimed by the Company was on account of equalized freight for the accounting years 1975-76 to 1979-80. The Assistant Collector turned down this claim, stating that it was not substantiated by documentary evidence. The Assistant Collector noted that despite multiple requests, the Company failed to produce the relevant freight bills and vouchers for the specified period. The Company argued that it had provided sufficient documentary evidence, including trial balance-sheets, consignor notes, and a certificate from a Chartered Accountant, which should have been sufficient under the guidelines issued by the Government of India. The Court held that the Assistant Collector's approach was improper and directed him to re-examine the claim, emphasizing that secondary evidence could be used when original documents were unavailable.2. Insurance on Goods in Transit Deduction:The second claim of deduction was for insurance on goods in transit for the accounting years 1975-76 to 1979-80. The Company supported its claim with a certificate from M/s. New India Assurance Company, indicating that insurance was paid for goods in transit. The Assistant Collector did not dispute the entitlement but rejected the claim due to the absence of insurance policies, vouchers, and receipts. The Court found this approach erroneous, stating that the certificate from a nationalized insurance company should have been sufficient. The Assistant Collector was directed to re-examine this claim.3. Discounts and Commissions Deduction:The third deduction sought was for discounts and commissions for the period from 1975-76 to 1979-80. The Assistant Collector rejected this claim, stating that the Company failed to produce invoices for verification and that the allowances and nature of the discount were not known at the time of removal of the goods. The Company argued that the discounts and commissions were based on established trade practices known to customers at the time of removal. The Court held that the Assistant Collector had not adequately addressed whether such trade practices existed and directed him to re-examine the issue, allowing the Company to establish the existence of these practices.4. Interest on Book Debts Deduction:The last claim was for interest on book debts. The Assistant Collector rejected this claim, stating that it did not fall within the expression 'post-manufacturing expenses.' The Company cited a Supreme Court decision in the case of Madras Rubber Factory Ltd. to support its claim. However, the Court noted that this decision was no longer valid as it had been recalled by the Supreme Court. Additionally, a previous Division Bench had already rejected a similar claim by the Company, making it res judicata. Therefore, the Court upheld the Assistant Collector's decision on this point.Conclusion:The Court set aside the Assistant Collector's order dated August 13, 1984, partially and remitted the proceedings back for fresh determination of the claims for deduction on account of equalized freight, insurance on goods in transit, and discounts and commissions. The Assistant Collector was directed to give the Company an opportunity to produce additional evidence and to dispose of the claims in accordance with the law. The petition was finally disposed of, with no order as to costs.