1993 (5) TMI 110 - AT - Central Excise

Tribunal excludes Dharmada receipts from assessable value, grants stay on pre-deposit & penalty

The Tribunal allowed the appeal, setting aside the impugned orders and directing revenue authorities not to include Dharmada receipts in the assessable ... Stay/Dispensation of pre-deposit - Valuation Issues Involved:1. Inclusion of Dharmada (charity) receipts in the assessable value.2. Applicability of previous judicial decisions on Dharmada receipts.3. Prima facie merits of the case and undue hardship in the context of stay applications.Detailed Analysis:1. Inclusion of Dharmada (charity) receipts in the assessable value:The primary issue in this case was whether Dharmada receipts collected by the appellant from its customers should be included in the assessable value for the purpose of central excise duty. The appellant argued that these receipts were meant for charitable purposes and should not be included in the assessable value. The respondent, however, contended that these receipts were compulsory and thus should be included in the assessable value.2. Applicability of previous judicial decisions on Dharmada receipts:The appellant relied on several judicial decisions, including:- AIR 1979 S.C. 346 - Commissioner of Income-tax (Central) New Delhi v. Bijli Cotton Mills (P) Ltd.: The Supreme Court held that Dharmada amounts collected from customers were not trading receipts and were meant for charitable purposes.- 1987 (30) E.L.T. 624 (Tribunal) - Mohan & Co., Madras v. Collector of Central Excise, Madras: The Tribunal held that Dharmada receipts did not form part of the assessable value.- 1992 (41) ECR 457 (Tribunal) - Collector of Central Excise, Allahabad v. Panchamukhi Engineering Works and Another: The Tribunal reiterated that Dharmada receipts should not be included in the assessable value.The respondent countered by citing the Madras High Court decision in N.S. Pandaria Pillai v. The State of Madras (1973) 31 STC 108, which held that compulsory payments collected by the assessee formed part of the taxable turnover.The Tribunal noted that the Supreme Court decision in Bijli Cotton Mills was later and more relevant, and thus held that Dharmada receipts should not be included in the assessable value.3. Prima facie merits of the case and undue hardship in the context of stay applications:The appellant argued that they had a good case on merits and that requiring them to deposit the disputed amount would cause undue hardship. The respondent, however, argued for the rejection of the stay application.The Tribunal considered the following:- Hon'ble Madhya Pradesh High Court in Kinetic Honda Motor Ltd. v. Union of India (1992 (61) E.L.T. 52 (MP)): The court emphasized the importance of a prima facie case in granting stay or interim injunction.- Hon'ble Delhi High Court in Uptron Powertronics v. Collector of Central Excise, Meerut (1987 (28) E.L.T. 61 (Delhi)): The court held that prima facie merits should be considered first, followed by financial hardship.- Hon'ble Supreme Court in Assistant Collector of Central Excise v. Dunlop India Ltd. and Others (1985 (19) E.L.T. 22 (S.C.)): The court laid down principles for granting interim relief, emphasizing the need to consider public interest, balance of convenience, and irreparable injury.The Tribunal concluded that the appellant had a prima facie case on merits, supported by previous judicial decisions, and that the balance of convenience was in their favor. Consequently, the Tribunal dispensed with the pre-deposit of the duty amount of Rs. 26,60,857.00 and penalty of Rs. 4,00,000.00, and directed that recovery proceedings be stayed during the pendency of the appeal.Conclusion:The appeal was allowed, and the impugned orders were set aside. The Tribunal directed the revenue authorities to give consequential effect to the order, emphasizing that Dharmada receipts should not be included in the assessable value, and granted the stay application based on the prima facie merits of the case and the undue hardship that a pre-deposit would cause to the appellant.