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TMI Blog2009 (4) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the respondents by the Dy. Commissioner, Central Excise, vide Order-in-Original dated 19-9-2002. On appeal, the Order-in-Original has been set aside by the Commissioner (Appeals) vide Order-in-Appeal dated 28-2-2003. The Commissioner (Appeals) has held that it is not established that advances taken as security deposit have depressed the sale price. He further held that nexus, if any, between the advances taken and prices charged, is not established. Now the Revenue is in appeal against that part of the order of Commissioner (Appeals), which relates to the period 1-7-2000 onwards. 7. The Revenue's appeal is based on following grounds : (i) That the advances obviated need for borrowals from other sources averting payment of interest resulting in pecuniary advantage to the respondents. (ii) That the 'notional interest' accruable on the advances, is an additional consideration flowing from the buyer to the respondents. (iii) That by very definition, the additional consideration is includible in the 'Transaction Value'. No nexus between the advance and the price of the goods is required to be established. (iv) That advance is taken from all the customers. There is no class o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction Value' included - - the amounts charged for, or to make provision for 'Financing'. These words were subsequently deleted. This is an unambiguous indication that the legislature did not intend to include 'Financing Charges' in the assessable value. 9.1 Thus, where the buyer paid financing charges to or on behalf of the assessee, such charges were earlier contemplated to be included in the assessable value, but the proposal was dropped before passing of the Bill. This is a clear indication of the intention of the legislature. 9.2 Thus, even if one agrees to the contention that the advances amounted to financing the manufacturer, the notional interest would be nothing but charges for financing, and would not be includible in the transaction value. 10. The notional interest is not part of the price of the goods. It is not a consideration received in return of the sale. What is received in return of the sale is the amount of advance, but not the interest accruable thereon. 11. The Rule 6 of the Central Excise Valuation Rules, 2000 requires that if there is any additional consideration, the value shall be the 'Transaction Value' plus 'Money Value of the additional considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut, their cost should also be added to job charges. There is no mention of the interest on value of these items. 12.5 Similar is the case for other components of the cost. Even where 'cost construction method' was adopted [Rule 6(b)(ii) of Central Excise Values, Rules, 1975], it was only the landed cost of various items, and not the interest thereon, which was to be added to the assessable value. 12.6 Thus, the proposals to include interest on advances, in the assessable value is inconsistent with the Department's view as regards adding value of additional consideration. 13. The explanation 2 inserted vide notification 11/2003-C.E. (N.T.), dated 1-3-2003 in Rule 6 of Central Excise Valuation Rules, 2000 has put the controversy at rest. The explanation says that the notional interest on advances shall not 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. 13.1 Thus, the explanation has clarified that the nexus between advance and the price of the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 lower side by such a transaction of interest free advance." 15. We also note that the Tribunal had occasion to examine the issue of demand of duty on the amount of notional interest accruable on the advances taken by the assessees from their customers for the post-1-7-2000 period in the case of the appeals filed by the Commissioner of Central Excise, Mumbai-III against 14 respondents. The Tribunal, vide Order Nos. A/636 to 651/08/C.II/EB, dated 16-7-2008, relying upon the Hon'ble Supreme Court judgment in the case of ISPL Industries Ltd. (supra) held that the evidence as to fixation of price has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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