Full Judgment
2. The facts of the case in brief are that the appellants manufactured Copper and Copper Alloys, billets, rods. During the course of scrutiny of the records of the appellants it was noticed that they were manufacturing tailor-made goods and were receiving advances against the order of supply of such goods. These advances were being kept by the appellants for more man six to eight weeks from the date of receipt of the order. The Department therefore, alleged that the interest which /would have been earned on these advances should be included in the assessable value in terms of the provisions of Rule 5 of the Central Excise (Valuation) Rules, 1975. Accordingly, a SCN was issued to the appellants asking them to explain as to why interest at the rate of 15% should not be included in the assessable value. In reply to the SCN the appellants admitted the fact of their having received advances/security deposits from their customers on the ground that in the event the customers did not lift the tailor-made goods, the manufacturer is not put to any loss. It was contended by them that the amount taken as security deposits were adjusted against the price payable by the customer. It was submitted by them that the security deposits did not influence the price.
3. Shri Y.K. Kumar, ld. Counsel appearing for the appellants submitted that the appellants were manufacturing goods both for Govt. Departments and private parties. He submitted that whereas security deposits were being demanded from the private parties, no such security deposits were asked for from the Govt. Departments. However, the price charged to the Private companies or the Govt. Deptts. remained uninfluenced. He submitted that there was no nexus between the sale price and the security deposits. He submitted that the Department has not received any evidence to prove that security deposits depressed the price of the goods. Ld. Counsel in support of his contention cited and relied upon the decision of this Tribunal in the case of Union of India v. Laxmi Machine Works Ltd. reported in 1995 (77) E.L.T. 799 (Mad.) in the case of Transformers & Electricals Kerala Ltd. v. C.C.E. reported in 1992 (62) E.L.T. 422 (Tri.) and in the case of Flex Industries Ltd. v.C.C.E.4. Ld. Counsel for the appellants also submitted that the demand was for the period from 1-1-1988 to 22-1-1992 and the SCN was issued on 28-5-1996 whereas the other demand was for the period from 23-1-1992 to 30-6-1993 and the SCN was issued on 28-5-1996. He submitted that both the demands were hit by limitation inasmuch as there was no suppression or mis-statement. As the appellants were being assessed under the facility of invoice based assessment and that in each invoice the advance was being mentioned and debited from the total sales value for arriving at the net amount payable by their customers. The ld. Counsel therefore, submitted that on limitation, the demands were time barred.
He, therefore, prayed that both on merits and limitation, the case is in favour of the appellants and prayed that the appeals may be allowed.
5. Shri P.K. Jain, ld. DR submits that advances were being received by the appellants. He submitted that notional interest will be applicable on each advance as the advance is used by the receiver for working capital which he would have taken as loan from a bank or any other institution. He submitted that since the advances were kept by the appellants for sometime, therefore, they should be presumed to have earned an interest and since interest was earned, it was includible in the assessable value. He therefore, reiterated the findings of the lower authorities.
6. Heard the submissions of both the sides. We note that Rule 5 of Valuation Rules provides :- "Where the excisable goods are sold in the circumstances specified in the 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 based on the aggregate value of such price and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee".
7. In the instant case, we note that the assessee was accepting an advance. There is no evidence placed on record that this acceptance of advance depressed the price of the goods. No evidence has been placed on record to show that interest was being earned on this advance. We have also perused the case law cited and relied upon by the appellants.
We note that since advance was not affecting price charged by manufacturers, the Department did not marshal any evidence to show that a part of the price being received as advance and being retained for a short period had been or would have been taken into consideration for fixing the uniform price for all buyers. In the circumstances it does not appear probable that this factor had to any extent depressed or otherwise affected the price charged. That being so, there was no extra consideration received, over and above the declared price. The notional interest on advances is, therefore, not includible in the assessable value.
8. On the question of limitation, we find that the advances were being shown in the invoices. We also note that duty was being assessed on these invoices, therefore, there was no suppression or mis-statement.
Thus, on limitation also the appellants succeed.
9. Having regard to the above findings, the impugned order is set aside and the appeals are allowed.