TMI Blog2021 (9) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... and even though the Assistant Commissioner had earlier required the Superintendent to submit a Verification Report, but he completely failed to take this Verification Report into consideration while passing the order date 31.12.2014 - The Assistant Commissioner held that the appellant was not entitled to claim deduction on account of bank charges and in regard to interest on receivables , the Assistant Commissioner held that the appellant had not submitted any documentary evidence to substantiate its version that interest an account of delay in payment was included/inbuilt in the price charged for the goods at the time of clearance. 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 and, therefore, deduction was to be allowed. The Tribunal accepted the claim of the assessee and held that deduction on interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 disallowance of the deductions claimed for the period 01.08.1990 to 28.02.1997 and the demands p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment 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 ₹ 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 the personal hearing the Ld. Advocate relied uplon the following ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme 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 includes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant pursuant to the 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 ₹ 14,26,413/- has been short paid by the assessee ii) In some cases, the total expenses actually incurred on both the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal No. 3906 of 2006 were decided by the Tribunal by an order dated 11.05.2011. It needs 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 appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee i.e. 9.5%, the practice, followed in the earlier order, the same has been adopted for verification of remaining period 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dec 1997 14430311 14341899 -374369.00 261552.00 Total 93388820.64 91891153.14 -4170673.98 4318548.36 As per the above calculation chart, where the actual charges are less than 9.5% as they claimed, it is deemed that the assessee have short paid the duty which come to ₹ 43,18,548/- and the same is to be deposited by the assessee and in some cases where actual charges are more than 9.5% as they claimed the charges to the extent of 9.5% may be allowed, and if the assessee felt that they have excess paid the duty on excess charges they may file refund claim separately. (emphasis supplied) 19. The Assistant Commissioner, thereafter disallowed the deductions and confirmed the demand of ₹ 1,79,63,423/- by order dated 31.12.2014. The operative part of the order is reproduced below: I find that in respect of deduction of interest on receivables, the Hon'ble Apex Court has observed that the question whether in a given case the price structure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee has not submitted any documentary evidence to substantiate their version that interest on account of delay in payment was included/inbuilt in the price charged for these goods at the time of clearance. Regarding deduction on account of bank charges, I find that the assessee has not submitted any evidence that they had paid bank commission or interest charges due to delay receipt of payment from the customer to the Bank. Therefore, I find that the assessee is not eligible for deduction on account of interest on receivable and bank charges in the instant cases. I also find that case laws and rules/ regulation referred by the assessee in their written submission dated 03.9.2014 does not support their case. Thus, I find that in the absence of documentary evidences, the assessee is not eligible for any deduction on account of interest on receivable and bank charges. I also find that Central Excise duty of ₹ 1,79,63,423/- is liable to be recovered from the assessee under Section 11A of Central Excise Act, 1944, so raised under the aforementioned 18 show cause notices issued to them during the period from 01.8.1990 to 31.12.1997. Further, I also find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal filed by the appellant and uphold the impugned order passed by the adjudicating authority. (emphasis supplied) 21. This appeal has, accordingly, been filed to assail the order dated 06.03.2018 passed by the Commissioner (Appeals). 22. Ms. Reena Khair learned counsel appearing for the appellant made the following submissions: i. The appellant had furnished voluminous evidence in support of the interest on receivables and collection charges borne by the appellant. The certificates of the Chartered Accountant, as well as the Profit and Loss Statement were submitted at the time of the filing of the price list itself. These documents were examined at various stages, including by the Commissioner (Appeals) in 1998, wherein he concluded that the issue was only of principle and the facts were undisputed. A verification of the information submitted was also carried out at the plant by the Superintendent, wherein the actual figures were verified with reference to the original documents. The Commissioner (Appeals) totally ignored all the evidence given by the appellant in this regard; ii. For the subsequent period based on the very same type of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making payment of the goods supplied to the Government Departments. The Revenue, however, proposed to disallow the deductions for which two sets of show cause notices (sixteen plus two) were issued. After the decision by a Larger Bench of the Tribunal on 06.06.2000 allowing deduction of interest only to the extent mentioned in the invoices, the matter was taken up by the appellant before the Supreme Court. The Supreme Court noticed that the issue as to whether interest on the price for the period during which the payment was deferred has to be deducted or not from the value of the goods on the date of removal had earlier come up for consideration before the Supreme Court in Asst. Collector of Central Excise Ors. vs. Madras Rubber Factor Ltd. [ 1986 Supp. SCC. 751 ] and the decision on the review that is reported in Government of India Ors. vs. Madras Rubber Factory Ltd. Ors. [ 1995 (4) SCC 349 ] The Supreme Court noted the earlier observations made by the Supreme Court in the review petition and the same are reproduced below: The case of the assessee (Madras Rubber Factory) is that where the goods are sold to upcountry wholesale buyers and payments are received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence. The fact that a particular period for payment is mentioned would indicate that the payment is not to be made immediately but at a subsequent date and that is credit sale and interest could be charged and deducted out of the sale price. But that circumstance, by itself, is not a decisive factor. Therefore, the Tribunal while remanding the matter should not have limited the investigation of the matter only to cases where the period has been subsequently stated in the invoice. Therefore, we are of the view that the Tribunal ought not to have confined the investigation by the concerned authority after remand to only that aspect of the matter and should have let the entire matter investigated as indicated by us. ******* These three cases were adverted to by a Bench of three judges to hold that the interest on receivables arises on account of time lapse between the delivery of goods and the realisation of monies is deductible from the assessable value of the goods at the time of removal from the factory of the assessee. For the same reason, bank charges included in the price on account of clearance of outstation cheques cannot form part of the price of the goods at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant, while in the fourth column the Superintendent calculated the actual interest on receivables and collection charges . These figures were arrived at after inspection of the records, including the invoices. 29. The Assistant Commissioner was required to take a decision after remand from Supreme Court and even though the Assistant Commissioner had earlier required the Superintendent to submit a Verification Report, but he completely failed to take this Verification Report into consideration while passing the order date 31.12.2014. The Assistant Commissioner held that the appellant was not entitled to claim deduction on account of bank charges and in regard to interest on receivables , the Assistant Commissioner held that the appellant had not submitted any documentary evidence to substantiate its version that interest an account of delay in payment was included/inbuilt in the price charged for the goods at the time of clearance. 30. At this stage, it would be pertinent to refer to the order dated 26.04.2006 passed by the Deputy Commissioner in connection with the seven show cause notices that had been issued to the appellant for the subsequent period from January 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are as follows:- In these two appeals, the short point arises for consideration is whether the average rate of interest shall be admissible as deduction while arriving at the assessable value or the actual interest receivable shall be deducted from the assessable value, on account of interest on receivables. 2. Such an issue was initially before the Hon ble Supreme Court coupled with a dispute about whether interest is to be computable with the lapse of time. So far as the admissibility of deduction is concerned, in the case of the appellant reported in 2004 (167) E.L.T.369 (S.C.), Hon ble Supreme Court following three earlier judgments, came to the conclusion that the interest on receivable is to be deducted while determining assessable value. This is patent from para 9 of the judgment. For calculation of interest and to ascertain its quantum para 10 of the judgment has dealt with that aspect. Hon ble Court has also remanded the matter to ascertain claim of receivable on the basis of time lapse between the delivery of goods and realizing of monies. 3. While the matter stood as above, the controversy came before us is to decide the quantum of deduction avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from the assessable value in the case of the appellant and in view of the decision of the Supreme Court, deduction of actual interest receivable in respect of each invoice has to be allowed. This order of the Tribunal, which squarely covers the controversy involved in this appeal, has attained finality as learned counsel for the appellant stated that no appeal was filed by the Department to assail this order of the Tribunal and this fact has not been refuted by the learned Authorized Representative of the Department. 34. This decision of the Tribunal was rendered on 11.05.2011, but both the Assistant Commissioner in the order dated 31.12.2014 and the Commissioner (Appeals) in the order dated 06.03.2018 completely ignored the decision of the Tribunal, which was binding on them and in fact both the Assistant Commissioner and the Commissioner (Appeals) had proceeded to rely upon the order dated 26.04.2006 passed by the Deputy Commissioner against whose order the appeals were decided by the Tribunal, after the Commissioner (Appeals) had rejected the challenge made by the appellant to the order dated 26.04.2006 passed by the Deputy Commissioner. The Assistant Commissioner and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles laid down in the earlier case cannot be permitted to take a contra stand in the subsequent cases [See: Birla Corporation Ltd. v. CCE [2005 (186) E.L.T. 266 (S.C.)], Jayaswals Neco Ltd. v. CCE, Nagpur [2006 (195) E.L.T. 142 (S.C.)] etc.] 15. The point in issue being concluded by the decision of this Court in MRF case (supra) and the fact that the Revenue did not file an appeal against the order of the Tribunal in ICI India case (supra), we do not find any merit in these appeals and dismiss the same with no order as to costs. (emphasis supplied) 37. A Division Bench of the Tribunal in M/s. Rosmerta Technologies Ltd. vs. Commissioner of C.E. ST, LTU Delhi [ Service Tax Appeal No. 57703 of 2013 decided on 25.11.2019 ] , also had an occasion to examine this contention. It was held that when for a subsequent period in the own case of the appellant it was held that service tax cannot be levied, which order had attained finality, the Department cannot be permitted to take a stand in the pending appeal that service tax is leviable. The relevant portion of the decision is reproduced below: 16. Learned Counsel for the Appellant, on instructions, h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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