TaxTMI 
TaxTMI 
2005 (4) TMI 219
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.... from M/s. Jindal Iron and Steel Company (JISCO in short) has influenced the price at which M/s. JVSL sold its product to M/s. JISCO. If so, whether the interest on the said advance is addable to the assessable value. M/s. JVSL manufacture HR Coils/Sheets/Plates of different grades. They supply 55% of their production to M/s. JISCO. M/s. JISCO paid an interest free advance of Rs. 150 crores in two instalments adjustable against the supply of goods to M/s. JISCO. In fact, M/s. JVSL is a group company of M/s. JISCO. The case of the department is that the interest free advance has influenced the price. It is stated that the advance had later been converted to equity. Revenue proceeded against the appellants. The Adjudicating Authority, in the ....
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....ii) The CBEC, in its Circulars, has clarified that unless a nexus is established by leading evidence as to the depression of price on account of advance, notional interest on advance would not be includible in the assessable value of the goods. (iv) Our attention was invited to explanation 2 to Rule 6 of the Central Excise Valuation Rules, 2000 wherein it is clarified that no notional interest on such advance shall be added to the value unless the Central Excise Officer has evidence to the effect that the advance received has influenced the fixation of the price of the goods by way of charging a lesser price from or by offering a special discount to the buyer who has made the advance deposit. (v) The only possible wa....
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....m M/s. JISCO. (vi) The learned Advocate relied on a plethora of case laws to buttress his contentions. (vii) Quoting from the statement of Shri M.V.S. Seshargiri Rao, the Director Finance of the appellants, the learned Advocate stated that M/s. JVSL matches landed cost of HR coils at the customers' locations if they buy the same from other competitors. The location of the customer is, therefore, relevant to determine the price even though the grades are the same. The pricing is also dependent upon the credit risk and bulk purchases. M/s. JISCO is a major buyer. The price at which goods are sold to M/s. JISCO is less than the price sold to others due to commercial considerations like volume of businesses and necessity....
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.... accrued on the advance provided by M/s. JISCO, is an additional consideration flowing back from the buyer to the manufacturer. Therefore, the interest on advance should form part of the assessable value of the goods sold as per Rule 5/Rule 6 of the Central Excise Valuation Rules, 2000. (ii) Further, she cited certain instances of sales to M/s. JISCO and other buyers wherein the price at which the goods were sold to M/s. JISCO was lower. Hence, she made the point that the advance has influenced the price and by following the ratio of Hon'ble Supreme Court, in the case of CCE v. ISPL Industries Ltd. - 2003 (154) E.L.T. 3 (S.C.), the interest on advance is to be included in the assessable value for payment of duty. (iii) She said ....
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....for the wholesale buyers and the noticee is charging a lesser price for M/s. JISCO who has given interest free advance of Rs. 150 crores. In these circumstances, in terms of clarification given by CBEC, in its Circular dated 22-6-1998 at para 6(i) and 6(ii), the money value to the extent of interest saved on such advance is required to be quantified and added for the purpose of determination of assessable value. In coming to the above conclusion, the adjudicating authority has not taken into account the commercial level at which the goods are sold to M/s. JISCO. It is stated that 55% of the goods are sold to M/s. JISCO and the rest to the other buyers. When the commercial levels are very different, one cannot expect the same price to differ....