Full Judgment
2. When these applications came up for hearing, with the consent of parties and after waiving pre-deposits, Appeals have been taken up for disposal, as the question for determination fall in a narrow compass.
3. The appellants before us are carrying on business at Pune in the manufacture of excisable goods falling under Chapter Heading 84.28, 84.31, 84.79, 90.31 and 90.33 of the Schedule to the Central Excise Tariff Act, 1985. Whenever the assessee appellant received orders from their customers, they manufactured the goods according to the requirements and specifications agreed to between the parties. It appears to safeguard the interest of the appellants, they received certain advances to the tune of 20 to 30% of the value of the final product. It was the contention of the department when they issued three Show Cause Notices dated 29.6.1995, 26.2.1996 and 1.4.1996 that the amounts which represented the notional interest which the appellants would have gained towards the advances must be taken into account for the purpose of valuation of the final products. The Assistant Collector, who heard the matter after considering the facts of the case by the Order-in-Original had dropped the demand notices, against which three appeals were filed before the Commissioner of Central Excise (Appeals), Mumbai by the department and the Commissioner of Central Excise (Appeals), Mumbai vide his Order No. YPP675 dated 29.7.1998 agreed with the contentions of the department. Hence the present three appeals by the appellants.
3. Shri S.P. Bhave, the Id. counsel appearing for the appellants stated before us that the final products namely gauging instrument and heavy machinery were manufactured according to the requirements of the Appellants' customers. To safeguard the Appellants' interest, namely the Appellants procured the raw material and on such procurement they would have to give certain guarantees to the suppliers of such raw materials to offset that they obtain the advances ranging from 20 to 30% of the value of the final products, which would be ultimately sold to the customers. If the customers failed to lift the final products it could not be sold to some other customers as the final products were made specifically for such customers as they were tailor made products.
He therefore argued that the advances which the assessees had received did not have any bearing on the final consideration paid by the customers. He also relied upon the judgement of the Tribunal in the case of Mukund Ltd. v. CCE (in Appeal Nos. 490/97 and Ors.) (Order No.1968-83/97 dated 30.4.1997) whereunder in similar circumstances the Tribunal had allowed the appeal of the assessee.
4. As against this the learned Departmental Representative would argue that while he reiterates the reasonings given by the Commissioner of Central Excise (Appeals), Mumbai, in the impugned order, he specifically stated that but for the advances obtained by the assessee they would have gone to the bank and obtained advances from the bank.
Therefore, there has been a notional gain representating (sic) the interest in this case.
5. We have considered the rival submissions. The facts have been fully mentioned in the earlier portion of the order. It is not in dispute in this case that there is no evidence has been led in by the department to show that when the advance was obtained by the assessee it did not have any effect on the fixation of the price of final product. In the absence of the same, legally the so-called notional interest cannot be added to the valuation of the goods for the purpose of levy of duty. In this connection, the decision of the Tribunal in Mukund Ltd. v. CCE referred to above dearly holds in favour of the appellants. Hence following the said judgement we allow the appeals of the appellants and set aside the impugned orders with consequential reliefs, if any, according to law.