TMI Blog2008 (8) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... . Respondent company is an undertaking wholly owned by the Government of Tamil Nadu. It is engaged in the manufacture of railway wagons and conveyor systems falling under Heading 8605.50 and 8428.00 respectively of the Schedule to Central Excise Tariff Act, 1985. Upon verification of their accounts, it was noticed on 16 th July 1998 that the respondent had entered into a contract, being Contract No.94/RS/PF EC/954/3 dated 1.12.1994, with the Southern Railways for manufacture and supply of 106 wagons of BTPGLN wagons for an amount of Rs.16,10,90,974/- which was inclusive of cost of steel at Rs.6,65,833/- per wagon. The cost of each wagon worked out to Rs.15,29,724/- (6,55,833 + 8,63,891). The Railways supplied free raw material worth Rs.7 lac per wagon. The respondent paid central excise duty @ 15% ad valorem and cleared 21 wagons to their customer till 16 th July 1998. It was also noticed that the respondent has adjusted the value in the invoices against 50% of the advance amount received from its customer. Respondent had also collected a sum of Rs.2,400/- per wagon as by way of inspection charges. This amount allegedly was not included in the assessable value. The total amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns under Section 11A of the Act and ordered that the said amount paid subsequently be appropriated against this duty liability. The Commissioner also imposed the penalty of Rs.20 Lac under Rule 173Q and Rs.34,18,250/- under Section 11AC of the Act. 4. Aggrieved against the said order-in-original passed by the Commissioner, the respondent preferred an appeal before the Customs, Excise Gold (Control) Appellate Tribunal (for short, 'the Tribunal'), Chennai. The matter came up before a two-member Bench of the Tribunal. 5. Member (Technical) held that so far as the interest on the advances received from the Railways is concerned, it is an admitted position that the respondent has adjusted the value mentioned in the invoice against 50% of the advance amount received from the Railways and that the amount of advance was deposited into the bank. Therefore, it can be logically concluded that the respondent has used the said amount for repayment of loan and thus saved huge amount by way of interest which would have been required to be paid to the bank on the loan amount. Hence, he concluded that the interest on advance was includible in the assessable value. He also held that the lon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty imposable under Section 11AC equal to the duty under Section 11AC is the maximum limit and it is not mandatory in each case that maximum penalty should be imposed. Hence, he reduced the penalty from Rs.34,18,250/- to Rs.11,50,000/-. 10. In short, the Member (T) confirmed the order of the Commissioner except the modification to the extent of reduction in the quantum of penalties. 11. Member (Judicial), however, disagreed with the Member (Technical) on the point as to whether interest on advances should be included in the assessable value. He held that in order to include the interest element, burden is on the Department to prove that advances received had a direct nexus with the price inasmuch as the price had been depressed. Applying the decision of this Court in the case of M/s. VST Industries v. Collector of Central Excise, Hyderabad 1998(97) ELT 395, he held that the deposit or advance ought to depress the price of the goods in order to include notional interest on such advance in the assessable value and in this case the Department had failed to show that the advance received had a nexus with the price fixed or the depreciation thereof. Thus, on this point he set a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of inspection charges in the assessable value, all the three members have given a common finding that the said charges are to be includible in the assessable value. It is stated that the assessee has not filed any appeal on this point. Thus, the order of the Tribunal has attained finality in this regard. 20. So far as the payment of differential duty on escalation bill is concerned, the assessee in reply to the show cause notice has admitted its liability to pay the said duty and the same has already been paid and pursuant to the finding of the Commissioner, the same has been appropriated against this liability. Tribunal has also recorded the same. There is no dispute on this point also. 21. So far as the interest on advances received from the Railways is concerned, by a majority of 2:1, it has been held that the advances received and the price were in full knowledge of the Department which is clear from the order in original no.71/96 dated 15.10.1996 wherein the Assistant Collector has noted about the advances received and has also held that the advances received had no nexus with the contract and dropped similar proceedings. 22. By the majority view, the Tribunal has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of advance deposits taken from some buyers, the price charged from all buyers has been reduced, then the element of notional interest on advance deposits, cannot be added. Obviously, where there are two prices, one for those who have made the advance and the other who have not, it would require no further proof of the lower price having been influenced by the interest-free advance made by the buyer. But otherwise it would require proof and the proof for the purposes of holding that interest-free advance has influenced the price would obviously be provided by the Revenue. There is no scope for any such presumption as canvassed on behalf of the appellant. We find the same position to be continued in the later amendment in the Rules of 2003 referred to above. As in Illustration 2, it talks of evidence to show that interest-free advance has resulted in lowering of the prices. The departmental circulars and the amendments in the Rules at the relevant time and subsequently too, do not envisage of any presumption to be drawn by the mere fact of interest-free advance by the buyer to the manufacturer. It requires proof and evidence to show that fixation of price has been influenced on the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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