TaxTMI 
TaxTMI 
2021 (9) TMI 141
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....ise duty, was confirmed with interest under section 11AA of the Central Excise Act, 1944 [the Excise Act]. 2. The appellant is engaged in the manufacture of asbestos cement pipes which are supplied mainly to Government Departments against rate contracts for carriage of drinking water and sewage. The appellant filed price lists under rule 173 C of the Central Excise Rules, 1944 for determination of the assessable value of the product and thereafter the price declaration under section 4(1)(a) of the Excise Act. The appellant had, as there were delays in making payment by the State Government Departments, claimed deductions on account of interest on receivables and collection charges @9.5%, based on the interest cost incurred for the average period of delay in making the payments in the preceding year. In support of this claim, certificates from a Charted Accountant were submitted. The certificates reflected that the interest costs incurred was in the range of 9.5% to 11.5%. By an order dated 30.07.1990, all the 22 price lists were approved on a provisional basis, allowing the deductions that were claimed. 3. Sixteen show cause notices were issued to the appellant proposing disa....
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....aterial to show that it was inbuilt in the price of the goods and that the Government Departments had recognized this aspect while issuing the rate contracts. The Assistant Commissioner also held that deductions claimed for collection charges were not admissible. The demand of duty for Rs. 1,54,55,619.70/- was, therefore, confirmed under section 11AA of the Excise Act with interest. 6. The appellant filed an appeal before the Commissioner of Central Excise (Appeals) to assail the aforesaid order dated 08.08.1997. The Commissioner (Appeals) decided the appeal by an order dated 04.02.1998. The Commissioner (Appeals) upheld the order disallowing interest on receivables but set aside the order of the Assistant Commissioner so far as it related to collection charges. The relevant portion of the order is reproduced below: "The question involved in this case is one of principle only. The issue under consideration is whether in a case like the present one where the contract or invoice does not show any separate liability for interest but such interest is built in the prices as claimed by the appellants, is it legally permissible to allow deduction on account of such interest. During ....
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.... Supreme Court. The Supreme Court, in its judgment dated 05.05.2004 rendered in Civil Appeal No's 5756-59 of 2000 [A Infrastructure Ltd. vs. Commissioner of Central Excise, Jodhpur], held that credit sales include cases where interest is inbuilt in the price. The Supreme Court also observed that the Tribunal should not have limited the investigation after remand to only cases where the period was stated in the invoices but should have let the entire matter to be investigated. The relevant portion of the judgment of the Supreme Court is reproduced below: "The question whether the interest that is payable on the sale price that is not yet paid by the customer is built into the price structure or not and, therefore, should be deducted from the value of the goods needs to be examined. In cases where buyers do not make payments immediately against delivery of the goods but payments are received subsequently it would indeed be a case of sale of credit and, therefore, interest is chargeable from the date of delivery of goods till the realization of price thereof and should be deducted from the value of the goods. The question whether in a given case the price structure itself includ....
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....e letter issued by the Deputy Commissioner. The relevant portion of the order passed by the Deputy Commissioner is reproduced below: "The datas relating to interest on receivables has been supplied by the assessee on invoice to invoice basis which has been got verified from the Range Officer. The interest on the amount has been calculated for the time lapse between raising of commercial invoices and the realization of monies. ******* Therefore, an invoice-wise chart showing the total collection charges and interest on receivables actually incurred and amount of total deduction claimed @ 9.5% by the assessee pertaining to each invoice has been prepared. From the chart so prepared it is revealed that: i) In some cases, the total expenditure actually incurred on both the accounts is less than the deductions claimed @9.5% by the assessee at the time of clearances of the goods and after allowing the deductions of actual expenses from the assessable value. I find that Central Excise duty to the tune of Rs. 14,26,413/- has been short paid by the assessee ii) In some cases, the total expenses actually incurred on both the accounts is more than the deductions claimed @9.5% by....
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....eds to be remembered that the Deputy Commissioner in the order dated 26.04.2006 had recorded a categorical finding that the interest component was inbuilt in the price of the product. However, the Deputy Commissioner also held that no deduction would be admissible where the total amount towards recoverable and collection charges in the invoices was less than 9.5% and in cases it was more than 9.5% then it would be allowed to the extent of 9.5% only. It is for this reason that in the two appeals before the Tribunal, the contention of the appellant was that deduction on interest has to be given based on the delay in payment for each invoice without any fixed average percentage (i.e. 9.5%) and this contention was accepted by the Tribunal and the appeals were allowed. The Tribunal observed that since there was no dispute regarding the admissibility of interest on receivables from the assessable value, deduction of actual interest receivables for each invoice has to be allowed. Thus, the Tribunal set aside the demand of duty, interest and penalty and allowed the entire deductions claimed by the appellant. It has been stated on behalf of the appellant that the aforesaid order of the Trib....
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....eriod i.e. from 1-8-1990 to 31-12-1997, it is found that the interest that the interest for the time lapsed between raising of invoice and actual realization of monies and collection charges are less then 9.5%, demand of short payment of duty is to be confirmed, and in some cases where actual interest and collection charges are more then 9.5%. but the assessee has claimed only 9.5%, thus it may be allowed to this extent, this verification has been done from invoice wise details as provided by the assessee. The summary of the verification is as under- S.No. Period 9.5% deduction as claimed by the assessee Actual interest and collection charges incurred Duty Excess paid Duty short paid 1. August 1990 to Dec 1990 1772308.32 1828902.03 -39865.26 28098.26 2. Jan 1991 to May 1991 5353341.28 7467735.03 -601831.61 162205.18 3. June 1991 to Oct 1991 2780084.84 4306721.16 -370152.74 51582.97 4. Nov 1991 to April 1992 835632.37 707736.46 -34863.90 62597.66 5. May 1992 to Sept 1992 1053763.22 1994064.24 -221061.21 11091.08 6. Oct 1992 to ....
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....s and should be deductible from the assessable value. Thus, by following the above observations of Hon'ble Apex Court, I find that the assessee is entitled to get deduction on account of interest on receivables only on the basis of documentary evidences to substantiate that there was credit sale and the price structure was inclusive of interest on receivable accrued on account of such credit sale. Thus, I also find that in case, deduction on account of interest on receivables cannot be allowed on the basis of circumstances itself i.e. delay in payment by the customer and in the absence of documentary evidences, it cannot be construed that the prices are inbuilt of interest & bank charges. In this regard, I also find that during personal hearing held on 01.9.2014, the learned advocate appearing on behalf of the assessee submitted that "As per contracts payment were to be made on delivery basis and the interest is only on account of delay not as per the payment schedule. Documentary evidences to this effect would be submitted by 03.9.2014". Thus, I find that the assessee have accepted that as per the contract the payment were required to be made at the time of delivery o....
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....so at the time of personal hearing. The issue for decision in this appeal is whether the appellant are entitled for deduction 9.5% claimed by them on interest on receivables & Bank Collection Charges. 7. ******* 8 I find that as per the directions of the Hon'ble Supreme Court the adjudicating authority was directed to examine the question whether in a given case the price structure itself includes the interest charged or not is a matter for establishment on evidence. Thus, I find that the impugned order has been issued as per direction of the Hon'ble Supreme Court. 9. I further find from the decision of the Hon'ble Supreme Court that the Hon'ble Court held in Para 8,9 & 10 the of order dated 05.05.2014 the appellant is entitled to get deduction on account of interest on receivable only on the basis of documentary evidences to substantiate that there was credit sale and the price structure was inclusive of interest on receivable accured on account of such credit sale and also on bank charges included in the price on account of clearance of outstation cheques. 10. I find from the impugned order that the appellant had not submitted documentary evidences for....
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....d are admissible and the demand of duty along with interest is liable to be set aside. 23. Shri Rakesh Agarwal learned Authorized Representative appearing for the Department made the following submissions: i. Since the issue on merit about allowing deduction of "interest on receivables" and "collection charges" is not under dispute and the quantum of deduction is only in dispute, the Tribunal may remand the matter for arriving at the duty considering (i) whether the price of goods is inclusive/inbuilt of interest and collection charges @ 9.5% as claimed by the appellant; (ii) to arrive at the amount of deduction after considering the interest actually paid from the date of clearance of goods till the receipt of payment from the price based on the decision at point (i);and ii. However, if the Tribunal decides to allow the appeal, the demand of short payment of duty amounting to Rs. 43,18,548/- may be upheld, being on account of the "interest on receivables" less than 9.5%, as was arrived at in the report of Superintendent dated 17.06.2010. 24. The submissions advanced by the learned Counsel for the appellant and the learned Authorized Representative of the Department hav....
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....d, therefore, interest would be chargeable from the date of delivery of goods till realization of price and should be deducted from the value of the goods. However, the question as to whether the price structure itself includes the interest charge or not is a matter which needs to be established by evidence. The Supreme Court, therefore, remanded the matter to the authority to examine the question whether "interest on receivables" arising on account of time lapse between the delivery of goods and the realization of monies is deductible from the assessable value of the goods at the time of removal from the factory. It also needs to be stated that after detailed discussion, the Supreme Court observed that the bank charges included in the price on account of clearance of outstation cheques cannot form part of the price of the goods at the time of removal and, therefore, have to be excluded from the price while calculating the assessable value of the goods. The observations made by the Supreme Court in regard to "interest on receivables" and 'bank charges' are again reproduced below: "In cases where buyers do not make payments immediately against delivery of the goods but paym....
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....at interest was incurred and was inbuilt in the price. The appellant did submit calculations and evidence and the Superintendent also visited the site to conduct a verification of all the documents, including the invoices. The Superintendent, thereafter submitted a detail verification report dated 17.06.2010 and, in view of the orders dated 26.04.2006 and 26.09.2006 passed by the Deputy Commissioner and Commissioner (Appeals) respectively while adjudicating the seven show cause notices that had been issued to the appellant for the subsequent period from January 1998 to June 2000, observed that "interest on receivables" and "collection charges" can be allowed on actual basis but only to the extent deductions were claimed by the assessee @ 9.5%. The Superintendent concluded that where the actual interest charges are less than 9.5% as claimed by the appellant on an average basis, it should be deemed that the assessee had short paid the duty which comes to Rs. 43,18,548/- and the same is required to be deposited by the appellant. However, in cases where the actual interest charges are more than 9.5%, then since the appellant had claimed @ 9.5% only, this much only should be allowed and....
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.... only followed the direction at (iii) and (iv) but failed to notice the observations made at serial no's. (i) and (ii) in the order of the Deputy Commissioner. 32. It also needs to be noticed that the against the aforesaid order dated 26.04.2006 of the Deputy Commissioner an appeal was filed before the Commissioner (Appeals) but the appeal was dismissed by order dated 26.09.2006. This order was assailed by the assessee before the Tribunal by filing in Excise Appeal No. 3906 of 2006. Two appeals, namely Excise Appeal No. 1681 of 2005 [filed against the order dated 18.02.2005 passed by the Commissioner (Appeals)] and Excise Appeal No. 3906 of 2006 [filed against the order dated 26.09.2006 passed by the Commissioner (Appeals)] came up for hearing before the Tribunal. The Tribunal noticed that the only issue before it was whether deduction on "interest on receivables" and collection charges should be based on the delay in payment for each invoice without any fixed percentage (i.e. 9.5%) or it should be @9.5%. This was for the reason that the Deputy Commissioner had recorded categorical findings that "interest on receivables" and 'bank charges' were inbuilt in the value of the goods ....
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....ere being no dispute about the admissibility of deduction of interest on receivables from the assessable value in the case of the appellant and the matter having been well settled by the judgment of Apex Court in the own case of the appellant, deduction of actual interest receivable in respect of each invoice is to be allowed. This is possible interpretation that Revenue has to make to reduce the litigation when the Apex Court in no uncertain terms laid down the law in paras 9 and 10 of the judgment and made it clear that the deduction is undeniable. 7. Learned DR submitted that interest has to be shown separately in the invoice. But such a plea is not supported by law when no provision of law was shown to us for appreciation. Once the deciding factor is lapse of time in between the delivery of goods and realization of money, that becomes basis for calculation of interest in respect of each amount involved in the invoice concerned. Our observation above calls for setting aside the order of the appellate authority below. We order accordingly and allow appeal of the appellant." (emphasis supplied) 33. The Tribunal, it needs to be emphasized, decided the aforesaid appeals tak....
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....lant in regard to the subsequent period holding that the actual "interest on receivables" should be deducted from the assessable value and the said order of the Tribunal has attained finality. The Department cannot be permitted in this appeal to contend that either no deduction should be made or at best, deduction can be made at the average rate of 9.5%, as claimed by the appellant. 36. This issue was examined by the Supreme Court in Commissioner of C. Ex., Hyderabad vs. Novapan Industries Tries Ltd. [2007 (209) E.L.T. 161 (S.C.)] and the relevant portion of the judgment is reproduced below: "11. In our view, the point in issue is squarely covered by the judgment of this Court in MRF case [(1986) Suppl. SCC 751] read with the subsequent order passed in the Review Petition reported in (1995) 4 SCC 349. 12. The Tribunal in its order has relied upon its earlier judgment in ICI India Ltd. v. CCE, Hyderabad [2000 (91) ECR 152 (T)] in which the similar issue was involved and the Tribunal had taken the view that interest being inbuilt in the price which had not been charged separately, was deductible from the assessable value. xxxxxxx 13. Counsel for the Revenue fairly conc....