2004 (5) TMI 66 - SC - Central Excise

Supreme Court: Deduct Interest on Receivables from Assessable Value of Goods

The Supreme Court allowed the appeals, directing authorities to consider the deductibility of interest on receivables and bank charges from the assessable ... Whether the interest accruing on advances are deductible from the price or not, and as to deduction of the bank charges and collection charges? Held that:- As it is clear that the decision in Commissioner of Central Excise, New Delhi v. Vikram Detergent Ltd. case (2001 (1) TMI 84 - SUPREME COURT OF INDIA) fully covers both the questions in this case and, therefore, we have no hesitation in modifying the order of the Tribunal to direct the authorities to whom the matters have been remanded to examine the question whether interest on receivables arises on account of time lapse between the delivery of goods and the realisation of monies is deductible from the assessable value of the goods at the time of removal from the factory of the assessee and also excludes the bank charges included in the price on account of clearance of outstation cheques. The appeals stand allowed accordingly. Issues:1. Deductibility of interest accruing on advances from the price.2. Deduction of bank charges and collection charges.Issue 1: Deductibility of Interest:The appellant claimed deduction for interest on delayed payments averaging between 3 to 12 months. The claim was supported by a Certificate of Chartered Accountant. However, the assessing authority, appellate authority, and Tribunal rejected the claim, stating that the contract did not specifically provide for such interest on credit sales. The Tribunal emphasized that interest deductible should be limited to the period mentioned in the invoice to avoid unintended consequences. The Supreme Court referred to past judgments, highlighting that interest on delayed payments is deductible from the value of goods if the sale is on credit and interest is charged from the date of delivery till the realization of payment. The Court emphasized that interest should be excluded from the price mentioned in the invoice to determine the assessable value.Issue 2: Deduction of Bank and Collection Charges:Regarding the deduction of bank charges and collection charges, the Court clarified that such charges are post-manufacturing and post-clearing expenses and should be deductible from the assessable value. The Court relied on previous judgments to support this position, emphasizing that bank charges, including those for clearance of outstation cheques, should not form part of the price of goods at the time of removal. The Court concluded that these charges are excludable from the price while calculating the assessable value of the goods. The Court directed the authorities to examine whether interest on receivables and bank charges are deductible from the assessable value of goods at the time of removal, in line with previous decisions.In conclusion, the Supreme Court allowed the appeals, modifying the Tribunal's order to direct the authorities to consider the deductibility of interest on receivables and bank charges from the assessable value of goods. The Court's decision was based on the principles established in past judgments, emphasizing the deductibility of interest on credit sales and post-manufacturing expenses from the price of goods.