TaxTMI 
TaxTMI 
2003 (4) TMI 99
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....in the assessable value of the goods. With minor variations in the facts of each case, the main question involved in all these appeals is the same viz. the notional interest is liable to be included or not in the assessable value of goods. This question has been differently framed in different appeals but crux of the matter for consideration remains the same, hence all these appeals have been heard together and they are being disposed of by one common order. In Appeal No. 410 of 2000, it was also indicated on behalf of the respondent that major part of the demand had become time barred. If necessary, we would advert to that question. No other question, in any appeal has been raised or pressed before us by either party. 2. For the sake of convenience, we refer to the documents on the record of the Civil Appeal Nos. of 2884-2892 of 1999, Commissioner of Central Excise v. M/s. ISPL Industries Ltd. The show cause-cum-demand notice dated 3-7-1995 is a long notice calling upon to show cause in respect of different matters under the Central Excise Act, besides one relating to inclusion of the notional interest in the assessable value, on the interest free advances taken by the assessee....
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....rred appeals against the orders of the CEGAT. 5. The respondent-manufacturers had resisted the demand on various grounds. Some of the manufacturers, who manufacture the tailor made goods i.e. as per the requirement of the buyer, they have to ensure that the goods manufactured, which are generally heavy machines, are taken delivery of failing which it may result in very heavy losses, as such machines would not be of any use for others nor it would be possible to get buyers for such tailor made goods. In such cases the advance taken is nothing else than mere security for the due performance of the contract. In some cases, it is submitted that advance of only a part of the amount is taken rest of which, for example, up to 90% is paid on delivery of the goods and the balance of 10% or whatever amount as per agreement it may be, is paid after the period fixed for watching the proper performance of the machinery. Therefore, sometimes the amount which remains in balance is paid much after the delivery of the goods. Their case is that it all depends on the terms and conditions of contract to contract on which advance is made in full or in part. Yet another submission which has been adva....
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...., as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; xxxxxxxxx (4) For the purposes of this section, - xxxxxxxxx "value:, in relation to any excisable goods, - (i) where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. xxx" xxxxxx Rule 5 of Central Excise (Valuation) Rules, 1975 falling in Chapter II reads as under : "Where the excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of Section 4 of the Act except that the price is not the sole consideration, the value of such goods shall be based on the aggregate of such price and the amount of the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee". 7. Shri R.P. Bhat, learned senior counsel appearing for the Revenue submits that amount of advance taken by a manufacturer from its customers free of interest and such money being utilized for the purpose....
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....consideration flowing directly or indirectly from the buyer to the assessee-manufacturer, either in cash or any other form, the additional consideration quantified in terms of money value is to be added to the price declared by the assessee for determining the normal price of the goods." We therefore, find that the main basis of adding the notional interest in assessable value of goods was on account of interest free loan which factor was responsible for determination of price between the parties namely, discount of 50% i.e. the price other than the normal price. There came to be two prices one for those who may not have advanced any interest free loan to the manufacturer and the other for Ponds (I) Limited which was a bulk purchaser to the extent of nearly 90% of the production for which purpose advance was also made available to the manufacturer without interest. The fact of interest free loan, has direct nexus with price fixation at a lower amount than the normal price. 8. The other case on the point which has been relied upon by the learned Counsel for the respondents is reported in 1998 (2) SCC 24, VST Industries Ltd. v. Collector of Central Excise, Hyderabad. The appell....
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....hi dated 22-6-1998. The circular was issued on the subject of liability of duty on notional interest on advance deposits taken by manufacturers, particularly in view of the decisions in the case of Metal Box (supra), Union of India v. Lakshmi Machine Works Limited, 1995 (77) E.L.T. 799 (Madras) and M/s. VST Industries Ltd. (supra). On consideration of the decisions indicated above, the circular notifies the opinion of the Law Ministry as follows : "(i) The notional interest on advances deposited by the wholesale buyers would be included for the purpose of determination of assessable value if the deposit influences the fixation of sale price either by way of charging a less price from or by offering a special discount to the buyer who has given the deposit. (ii) If two different price exist, one for the wholesale buyer who has deposited the advance and the other for the wholesale buyer who has not deposited the advance, they would form two different classes of buyers and two different assessable values can be arrived at. For the wholesale buyer depositing the advance, the notional interest on advance deposit should be added for the purpose of determination of the a....
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.... per design and specification furnished by B at a price of Rs. 10 lakhs. A takes 50% of the price as advance against these goods and there is no sale of such goods to any other buyer. There is no evidence available with the Central Excise Officer that the notional interest on such advance has resulted in lowering of the prices. Thus, no notional interest on the advance received shall be added to the transaction value." It is submitted that besides illustration 1, the illustration 2 covers the cases of all such respondents who manufacture the goods as per design and specification given by the buyer. It has, however, been rightly pointed out on behalf of the appellant the above noted notification dated March 1, 2003 would not be applicable to the present appeals since the appeals relate to the period prior to 2003 but there is no dispute that the cases in appeal are covered by the other circular of 1998 referred to earlier. Nonetheless, the notification dated 1-3-2003 has been issued, though not applicable in the present cases, on the principle that in case interest free advance does not influence the price by making it lower than the normal price, notional interest is not to be a....