A.
Infrastructure Ltd. Vs. Commissioner of Central Excise, Jaipur [2004] Insc 350
(5 May 2004)
Cji
& G.P. Mathur. Rajendra Babu, Cji. :
These
appeals are filed under Section 35L(b) of the Central Excise Act, 1944 against
an order passed by the Customs, Excise and Gold (Control) Appellate Tribunal
(hereinafter referred to as the Tribunal). In that proceeding the appellant
raised two issues, namely,
(i) whether
the interest accruing on advances are deductible from the price or not, and
(ii)
as to deduction of the bank charges and collection charges.
During
the relevant period, the appellant manufactured and sold the goods principally
to Government and Public Sector Undertakings. On account of the fact that the
payments were not effected against delivery or within any specified period, the
payments of the prices became delayed averaging between 3 to 12 months and,
therefore, the appellant claimed deduction in respect of interest of such
receivables calculated for the period between the date of removal till the date
of realisation of payment. The deduction so claimed was supported by
Certificate of Chartered Accountant for the relevant period.
Deductions
were also claimed in the price list filed from time to time. The assessing
authority, the appellate authority and Tribunal rejected the claim made by the
appellant on the basis that the contract did not specifically provide for
payment of such interest on sales on credit. The Tribunal stated the matter of
law as follows :- "The interest so deductible is only the interest for the
period mentioned in the invoice, otherwise it will lead to unintended
consequences. In cases where payment to the manufacturer is indefinitely
delayed or where the dealer refuses to pay the price, the sale price will stand
wiped off, because the interest may exceed price. In such a case, are not the
goods liable to excise duty ? The answer can only be emphatic 'no'. Excise duty
is on the manufacturer of the goods. It is not depending on the issue as to
whether the manufacturer gets the price of the goods from the dealer or not.
So, the interest charged from the date of delivery till the realisation of the
price should be understood with reference to the period fixed in the invoice.
If the invoice provides a specific period up to thirty days for effecting
payment, interest from the date of delivery till the expiry of that period of
thirty days alone is deductible from the price mentioned in the invoice."
This part of the order is challenged apart from other aspects to which we will advert
to a little later.
It is
pointed out that this Court had occasion to examine the question as to the
value of the goods on the date of removal whether interest on the price for the
period during which the payment is deferred has to be deducted or not in the
case of Asst. Collector of Central Excise & Ors. vs. Madras Rubber Factory
Ltd., 1986 Supp. SCC 751. This decision again came up by way of review in the
decision reported in Government of India & Ors. vs. Madras Rubber Factory
Ltd. & Ors., 1995 (4) SCC 349. In the second judgment, this Court stated as
follows :- "The case of the assessee (Madras Rubber Factory) is that where
the goods are sold to upcountry wholesale buyers and payments are received
quite sometime later, it is indeed a case of sale on credit and, therefore, the
interest charged from the date of delivery of goods till the date of realisation
of the price thereof should be deducted from the value of the goods. The
interest charged, it is submitted, is only in lieu of the time taken in making the
payment by the upcountry wholesale buyer. Since this is the amount received
subsequent to the sale from the depots and does not fall within the ambit of
any of the expenses held includable in Bombay Tyre International, it is clearly
excludable. The claim for this deduction is, therefore, allowed." (emphasis
supplied) A circular was also issued by the Government which is to the effect
that interest on receivables cannot be permitted to be deducted from the
assessable value if the interest is not charged over and above the sale price
of the goods. However, this aspect was not accepted by the Tribunal. It was
held that if the assessee is claiming interest out of the price mentioned in
the invoice, when the period for its payment is mentioned and when the invoice
makes it clear that the sale is on credit, interest on the amount for the
period of credit permitted must be a permissible deduction and it must be
excluded from the price fixed in the invoice for finding out the assessable
value.
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.
This
Court clearly stated in 1995 (77) ELT 433 that since the amount is received
subsequent to the sale from the depots and does not fall within the ambit of
any of the expenses held includible in Bombay Tyre International, it is clearly
excludible and the claim for this deduction should, therefore, be allowed.
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 realisation 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 interest charged or not is a matter for establishment on
evidence. 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.
Next
we have to consider deduction of the bank charges and collection charges. We
must make it clear that if the invoice price is the basis for valuation bank
commission or interest charges payable to the bank in the account of the
customer are definitely in the nature of post-manufacturing and post-clearing
expenses and should be deductible from the assessable value. It cannot be
stated that such expenses will form part of the sale price. The view taken by
us finds support from the decision of this Court in Commissioner of Central
Excise, New Delhi vs. Vikram Detergent Ltd., 2001 (2) SCC 417, which conclusion
was arrived at by this Court after examining earlier decisions of this Court in
Asst. CCE vs. Madras Rubber Factory Ltd. [supra], Shriram Fertilizers &
Chemicals vs. Union of India, (1997) 96 ELT 12 (SC), and Government of India
vs. Madras Rubber Factory Ltd. [supra]. 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 the time of removal and as such excludable
from the price while calculating the assessable value of the goods.
Therefore,
we think, it is clear that the decision in Commissioner of Central Excise, New Delhi vs. Vikram Detergent Ltd. case
(supra) fully covers both the questions in this case and, therefore, we have no
hesitation in modifying the order of the Tribunal to direct the authorities to
whom the matters have been remanded to examine the question whether 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 and also excludes the
bank charges included in the price on account of clearance of outstation cheques.
The
appeals stand allowed accordingly.
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