Famm Limited Vs. Commissioner of Central Excise

Famm Limited vs Commissioner of Central Excise

Type Court Judgment Court Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai Decided Aug 19, 1999

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Citation: sooperkanoon.com/16544
Court: Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Judge: J T J.H., G Srinivasan
Decided On: Aug 19, 1999
Subject: MRTP

Case Summary

AI-generated summary - not the official court judgment text.

MRTP

Key legal issue: MRTP

Parties & Advocates

Appellant / Petitioner

Famm Limited

Respondent

Commissioner of Central Excise

Legal References

Reported In: (1999)(66)ECC811

Excerpt

.....the manufacturers from the buyers of their goods in the assessable value. these appeals are therefore disposed of in this common order.2. we have heard shri rohan shah for the appellants and shri deepak kumar for the revenue.3. the appellants manufacture tailor made machines. against the advances taken by them, they gave to their customers bank guarantees which were kept alive for the period of three months after the deliver (sic) [delivery] of the goods. in three show cause notices it was alleged that the notional interest on the deposit so taken was includible in the assessable value of the machines. the charge was upheld by the lower authorities resulting in the confirmation of demand totally amounting to rs. 12,44,625.22. in the order arising out of one show cause notice, a penalty of rs. 3,57,109.78 was also imposed. the commissioner (appeals) in the impugned order upheld the confirmation of the demand but waived the penalty. hence the present appeal.4. before the lower authorities and before us the claims made are that the advance was taken as an established commercial practice, that there were counter-guarantees to the customers and that the composition of value of the goods was not influenced by the deposits taken. the relevant case law was also cited.metal box india ltd. v. collector , the supreme court had held that the interest advance taken by the manufacturers from the buyer was includible in the assessable value. this judgment came for consideration of the supreme court later in the case of vst industries ltd. v. collector of central excise 1998 (97) e.l.t. 395 (s.c.). in this judgment after taking cognizance of the metal box judgment, the court held that only in those cases where nexus between the advance and the compilation of price was established would the interest on advance be added to the assessable value. following this ruling, several orders were made by the tribunal, latest are as follows :parishudh machines pvt. ltd. v. cce, meerut 1999.....

Full Judgment

1. These three appeals involved the single issue and that is the includibility of the notional interest taken by the manufacturers from the buyers of their goods in the assessable value. These appeals are therefore disposed of in this common order.

2. We have heard Shri Rohan Shah for the appellants and Shri Deepak Kumar for the Revenue.

3. The appellants manufacture tailor made machines. Against the advances taken by them, they gave to their customers bank guarantees which were kept alive for the period of three months after the deliver (sic) [delivery] of the goods. In three show cause notices it was alleged that the notional interest on the deposit so taken was includible in the assessable value of the machines. The charge was upheld by the lower authorities resulting in the confirmation of demand totally amounting to Rs. 12,44,625.22. In the order arising out of one show cause notice, a penalty of Rs. 3,57,109.78 was also imposed. The Commissioner (Appeals) in the impugned order upheld the confirmation of the demand but waived the penalty. Hence the present appeal.

4. Before the lower authorities and before us the claims made are that the advance was taken as an established commercial practice, that there were counter-guarantees to the Customers and that the composition of value of the goods was not influenced by the deposits taken. The relevant case law was also cited.Metal Box India Ltd. v. Collector , the Supreme Court had held that the interest advance taken by the manufacturers from the buyer was includible in the assessable value. This judgment came for consideration of the Supreme Court later in the case of VST Industries Ltd. v. Collector of Central Excise 1998 (97) E.L.T. 395 (S.C.). In this judgment after taking cognizance of the Metal Box judgment, the Court held that only in those cases where nexus between the advance and the compilation of price was established would the interest on advance be added to the assessable value. Following this ruling, several orders were made by the Tribunal, latest are as follows :Parishudh Machines Pvt. Ltd. v. CCE, Meerut 1999 (82) ECR 613 (Tribunal) (3) Punjab Power Generation v. CCE, Chandigarh 1999 (82) ECR 631 (Tribunbal).

7. In the proceedings before us we find that this burden to establish a nexus has not been discharged by the department.

8. Shri Deepak Kumar submits that in the case are tailor made goods, it is extremely difficult to establish a nexus. It is observed by the Tribunal in para 6 of the judgment in the case Gautam Processors (I) Ltd. v. Collector Central Excise 1998 (27) R.L.T. 217 that the difficulty in establishing the nexus does not relieve the department of the responsibility.

9. In view of the law laid down in this case, we allow the appeal with directions of consequential relief, if any.

Same Court & Year Customs Excise and Service Tax Appellate Tribunal CESTAT Mumb... Same Parties Famm Limited vs Commissioner of Central Excise Same Subject MRTP Same Judge J T J.H., G Srinivasan