TaxTMI 
TaxTMI 
1998 (1) TMI 73
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.... machinery to manufacture cigarettes for and on behalf of VST Industries Ltd. (hereinafter referred to as "VST"). The question involved in these appeals, therefore, relates to the fixation of the assessable value of the cigarettes manufactured and sold under the brand name owned by VST. 3.The undisputed facts are that the cigarettes manufactured by the appellants are sold in wholesale, ex-factory, at cum-duty prices to main dealers who buy these cigarettes on a principal-to-principal basis. The main dealers in turn sell the cigarettes to other wholesale dealers called sub-dealers who in turn sell these cigarettes to the retailers. The cigarettes were being sold by the appellants either on cash-and-carry basis or by extending credit facilities to few of the main dealers. As the appellant company, namely, VST found that several of the main dealers were taking considerable time in making remittances for cigarettes which were delivered to them, they issued a circular dated 22nd September, 1981 whereby it introduced credit facility if interest free security deposits were made with the company. In the said circular it was written that "with a view to provide the facility of such credit ....
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....The said show cause notice also referred to the receipt of the freight service charges by the appellants, but in these appeals we are not concerned with that question. 5.Reply was sent to the said show cause notice refuting the claim of the excise authorities. VST while denying its liability paid the demand of Rs. 2,23,10,405.79 under protest. The other two appellants, namely, Venus Tobacco Company Pvt. Ltd. and Hyderabad Deccan Cigarettes Factory Ltd. similarly paid Rs. 3,92,864.89 and Rs. 18,84,718.74 respectively. 6.On 17th March, 1988 the Assistant Collector of Central Excise passed an adjudication order against VST Industries Ltd. and confirmed the demand of Rs. 2,23,10,405.79. Similar orders were also passed against other two appellants by their respective Assistant Collectors of Central Excise. All the three appellants then filed appeals. The Collector of Central Excise (Appeals) passed an order on 19th August, 1988 whereby he set aside that part of the Assistant Collector's order which sought to add notional interest to security deposits for re-working the assessable value, while confirming the addition of the freight service charges. 7.The excise authorities then filed ....
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....n strong reliance was placed on the decision of this Court in the case of Metal Box India Ltd. v. Collector of Central Excise, Madras [ 1995 (75) E.L.T. 449 (SC) = (1995) 2 SCC 90]. 10.Before referring to the decision in Metal Box's case it will be appropriate to refer to other decisions which are relevant on the point in issue which are Collector of Central Excise v. Indian Oxygen Ltd. [ 1988 (36) E.L.T. 730 (S.C)] and Government of India v. Madras Rubber Factory Ltd. [1995 (77) E.L.T. 433 (S.C.)]. In Indian Oxygen case two questions which arose for consideration were whether rental charges for gas cylinders and interest earned on deposit made for several return of gas cylinders, whether interest be notional or actual, could be included in determining the assessable value. It was observed by this Court as follows : "It is well settled that the levy under the Act, is on the manufacture. Under Section 4(1)(a) of the Act, excise duty is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this Section, be deemed to be the normal price thereof, that is to say, the price at which such goods are ordinary sold by the assessee t....
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....of such goods is not ascertainable or in a situation where the normal price of such goods is not ascertainable for some other reason that Clause (b) is attracted, whereunder the nearest ascertainable equivalent price is ascertained in accordance with the rules framed in that behalf. Clause (b) is in the nature of a residuary clause which should be resorted to where the normal price cannot be ascertained for the reasons mentioned therein. In other words, where the normal price is available or is ascertainable, resort to Clause (b) is not permissible." It then considered as to what are the various deductions from the price received which were permissible in order to arrive at the assessable value. One of the amounts claimed as a deduction from the amount received by the manufacturer was the element of interest received by it on the goods sold on credit. Dealing with this the Court at Page 470 observed as under : "The case of the assessee (Madras Rubber Factory) is that where the goods are sold to up-country wholesale buyers and payments are received quite sometime later, it is indeed a case of sale on credit and, therefore, the interest charged from the date of delivery of goods ti....
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....nds India Ltd. which were to be deducted from the gross price. This deduction was not allowed by the excise authorities and the Tribunal. It was contended on behalf of the assessee in this Court that the Tribunal erred in restoring the loading of purchase price by the ad hoc interest on advances made by Ponds India Ltd. to the assessee. While rejecting this contention this Court took notice of the fact that Ponds India Ltd. was a wholesale buyer who was lifting ninety per cent of the total production of the appellant. The assessee was giving to Ponds India Ltd. fifty per cent discount from normal price and Ponds India Ltd. had given large amounts of money free of interest to the assessee. In these circumstances it was held that the price charged by the appellant from Ponds India Ltd. could not be said to be the normal price of containers and, therefore, the action of the department in taking into account the notional interest on the advances given was upheld. 13.Metal Box case is clearly distinguishable. The amounts given as security deposit in the present cases represents only value of 21 days supply in a year whereas in Metal Box case large amounts of money had been advanced. Se....