Deduction of interest on receivables from assessable value upheld where invoices and contract documents identified the interest element.

Interest attributable to the credit period and embedded in the agreed sale structure was treated as deductible from the assessable value for central excise duty where purchase orders and invoices identified the interest element and the governing circular recognised exclusion of delayed payment charges shown separately or indicated in the invoice. Consistent Tribunal practice and the department's acceptance of the assessee's earlier period supported the same approach. On that basis, the duty demand was unsustainable, and the associated interest and penalty could not survive.

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Issues: Whether interest on receivables, shown as part of the sale price and linked to the credit period in purchase orders and invoices, was deductible from the assessable value for central excise duty.

Analysis: The deduction of interest was supported by the purchase orders and invoices, which recorded that the agreed price included an identifiable amount towards interest for the credit period. The Board's circular of 01.07.2002 clarified that delayed payment charges are excluded from transaction value if separately shown or indicated in the invoice and charged over and above the sale price. The issue had also been consistently decided by Tribunal benches in favour of allowing such deduction even where the interest element was built into the price. The appellant's own earlier period had also been accepted by the department, and no appeal had been filed against that order. The demand could not be sustained merely on the basis of the accounting treatment adopted by the appellant. Since the duty demand was unsustainable, interest and penalty could not survive.

Conclusion: The deduction of interest on receivables was admissible, and the demand of duty, interest, and penalty was set aside in favour of the assessee.

Ratio Decidendi: Interest attributable to the credit period and forming part of the agreed sale structure is deductible from transaction value when its exclusion is supported by the contractual documents and the governing circular, and an unsustainable duty demand cannot sustain interest or penalty.

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