TMI Blog2003 (4) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... 2892 - - - Dated:- 21-4-2003 - S.N. Variava and Brijesh Kumar, JJ. [Judgment per : Brijesh Kumar, J.]. - All the above noted appeals have been preferred by the Revenue under Section 35L(b) of the Central Excise and Salt Act, 1944 (for short 'the Act') against the orders passed by the Customs, Excise and Gold (Control) Appellate Tribunal (for short 'CEGAT'), allowing the appeals of the assessees and holding that notional interest on the advances taken by the assessees, from the buyers is not liable to be added 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessable value as per the provisions under Section 4 of the Central Excise Salt Act, 1944 read with Rule 5 of the Central Excise (Valuation) Rules, 1975. 4.The assessing authorities and the appellate authority did not accept the explanations of the assessees and added the notional interest accrued on advances made to the manufacturers, in the assessable value. The CEGAT, however, set aside those orders holding that it was not liable to be included in the assessable value. The Revenue has preferred 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to be the normal price of such goods in relation to each such place of removal; where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, of this proviso, the price ornotwithstanding anything contained in clause (iii) the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; xxxxxxxxx For the purposes of this section, - xxxxxxxxx "value:, in relation to any excisable goods, - 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 bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the banks on the loan would be part of cost of production passed on to the customers of the assessee. It has been held : "Section 4(1)(a) that normal price would be price which must be the sole consideration for the sale of goods and only under such a situation sub-section (1)(a) would come into play. If the price in a particular transaction is not the sole 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 availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance, there would be no occasion to contend that the price charged uniformly from both sets of the buyers would still not be a normal price. 9.Learned Counsel for the respondents in one of the appeals, has drawn our attention to a circular of Government of India, Ministry of Finance (Department of Revenue), Central Board of Excise Customs, New Delhi 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 bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance payment at Rs. 100 per piece. However, X also sells such goods to Z without any advance payment at the same price of Rs. 100 per piece. No notional interest on the advance received by X is includible in the transaction value. Illustration 2 - A, an assessee, manufactures and supplies certain goods as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 12.In the appeals before us, neither there is any evidence or proof on the record nor it is the case of the appellant on facts, that the interest free advance has influenced the price and the price lower than the normal price had been charged by the respondents. We do not think it necessary to deal with facts of each case separately since it is not in dispute that interest free advances were made by the buyers but at the same time it is also not in dispute that such advances had never influenced the price charged by the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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