Tribunal allows interest deduction on receivables for Central Excise duty assessment

The Tribunal allowed deduction towards interest on receivables for determining the assessable value for levying Central Excise duty, citing Supreme Court judgments and previous case law. It held that interest deduction is permissible regardless of whether interest is collected separately or included in the gross price of goods. The Tribunal found the denial of deduction unjustified and remanded the case for re-consideration to grant the necessary relief to the appellants based on the correct amount of deduction due for interest on receivables.

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Issues:
Claim of deduction towards interest on receivables for the purpose of arriving at assessable value for levying Central Excise duty.

Analysis:
The appellants, manufacturers of goods liable to central excise duty, claimed deduction towards interest on receivables to determine the assessable value for levying Central Excise duty. The claim was based on the argument that interest for the period between sale of goods and receipt of payment should be deducted to make the assessable value equal to the price at the time of sale. However, the claim was rejected on the grounds that no separate interest was levied for payment delays, and deduction is not permissible if interest is not separately collected. The appellants argued that deduction is allowed irrespective of whether interest is recovered separately or included in the gross price of goods, citing Supreme Court judgments in the MRF case. The Tribunal also referred to the ICI India Ltd. case where deduction towards interest on receivables was allowed even when interest was not charged separately. The Tribunal emphasized that expenses incurred on factors contributing to the value up to the sale date are liable to be included in the assessable value, including interest on receivables incurred after the sale. The Tribunal concluded that interest deduction is permissible regardless of whether interest is collected separately or part of the gross price.

The Tribunal found that the denial of deduction towards interest on receivables in the present case was unjustified based on the legal position established by the Supreme Court in the MRF cases and the CEGAT decision in the ICI India Ltd. case. It was clarified that the relevance of interest being collected separately or forming part of the gross price is not a determining factor for allowing the deduction. Therefore, the impugned orders were set aside, and the case was remanded to the jurisdictional Assistant Commissioner for re-consideration to grant the necessary relief to the appellants after determining the correct amount of deduction due for interest on receivables.

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