Judgment:
1. Appeal No. E/1696/93-A & E/2035/94-A are filed by the party and E/CO/425/94-A in Appeal No. E/2035/94-A is filed by the Department involving a common issue, and, therefore, they are clubbed together and are being disposed of by this common order.
2. The issue relates to interest on deposit. The point to be considered in these appeals is whether interest on deposits and trade advances collected by the appellants from their buyers is to be included in the assessable value of the goods namely Electrical Resistance Wires manufactured by the appellants.
3. Shri S.R. Mukherjee, learned Advocate appearing for the appellants submitted that the appellants have two type of customers namely (1) consignee agent and (2) dealers. The appellant received trade deposit from consignee agent and trade advances from dealers. He said that the appellants had received deposits of Rs. 19.5 lacs on which they paid interest at 20% per annum on Rs. 12.5 lacs. The appellants had received these amounts as security against the supply of the goods to their customers. The appellants had paid interest 12% per annum to the consignee agent on deposits made by them but did not pay any interest to the dealers on account of advances received from them but nevertheless the price for sale of the goods to both type of parties is the same. He contended that the deposits had nor nexus to the manufacturer of the goods and the Department has not proved that these deposits were utilised in the manufacture of excisable goods nor mention as such in the show cause notice. He said that the entire advances received from dealers have been returned to them and even then price for sale to both type of parties whose advances have been returned and whose advances have not been returned are the same. He said that the issue is covered by the decision of the Tribunal in the case of Mahavir Aluminium Ltd. v. Collector of Central Excise, Jaipur, 1994 (70) E.L.T. 678 (Tribunal), wherein it was held that where there is no evidence that interest free security deposits/advance payments made by the dealers have led to a depression in the sale price of the excisable goods, where there were dealers who had not made any deposits, still the price charged from them was the same as charged from the dealers who had made the deposits. The interest element did not influence the price of the goods and in the circumstances these deposits/advances could not be considered as an additional consideration for the purpose of Section 4 of the Act. He also referred to the decision of the Supreme Court in the case of Collector of Central Excise v. Indian Oxygen Ltd.,(SC) and Eicher Motors Ltd. v. Collector of Central Excise, 1992 (58) E.L.T. 90 (Tribunal).
3A. While countering the arguments Shri Satish Shah, learned JDR submitted that not even single sale has taken place without deposit and on the other hand every buyer whether he was consignee agent or a dealer was required to deposit before buying the goods which shows that there was nexus between the supply of goods and deposit. He said that it cannot be said that there was no mention in the show cause notice inasmuch as it was specifically charged in the show cause notice that the appellants have contravened the provisions by not adding the additional consideration flowing directly from the buyers as such the quantum of interest involved by taking trade deposits and trade advances from the buyers. He said that the decision in the case of Mahavir Aluminium Ltd. (supra) is squarely distinguishable from the fact that since there were dealers who had not made any deposits in that case but this is not so in the present Case as a deposit is collected from each and every buyer. In fact in the very case in para 17 of that order it was clearly observed that in each case the facts and circumstances have to be properly analysed in arriving at the conclusion that whether interest on deposits to be deducted or not in determining the assessable value. He argued that the ratio of the decision in the case of Indian Oxygen Ltd. (supra) is not relevant in this case because in that case the security deposit was obtained by the manufacturers for the safe return of cylinders, hence it was held therein that security deposit in respect of cylinders was nothing to do with the excisable commodity namely gas but that is not the issue in the present case. Similarly in the case of Eicher Motors Ltd. (supra) it was held that interest accrued on security deposits related not to manufacture of motor vehicles but servicing the motor vehicles. On the other hand the Tribunal had taken the view in the case of Ramdas Motor Transport Ltd., 1988 (36) E.L.T. 629 that by obtaining interest through loan, appellant gets considerable working capital which they would otherwise have to borrow from the bank and to pay commercial bank interest thereon. The interest free deposit constitutes additional consideration in lieu of sale of the manufactured goods and hence interest accrued on such deposits will form a part of the assessable value of the goods. Reliance has been placed in the case of Britannia Industries Ltd. v. Union of India, 1989 (44) E.L.T. 630 wherein it was held that the interest payable/paid by the manufacturers on the deposits made by the customers is includible in the value and is not deductible from price to determine the value because the manufacturer would have incurred the said interest had he borrowed or taken loan from the banks. He also referred to the following decisions in support of his contention :-Raymond Woollen Mills Ltd. v. Union of India, 1992 (57) E.L.T. 396 (Bom.).Ramdas Motor Transport Ltd. v. Collector of Central Excise, 1988 (36) E.L.T. 629 (Tribunal).Collector of Central Excise v. VST Industries, 1991 (52) E.L.T. 59 (Tribunal).
4. We have considered the rival submissions. Admittedly the appellants have collected deposits and advances from customers without any exception towards supply of goods, apart from price and no deposit amount has been returned during the period in question although advances received from the dealers have been returned to them subsequent to the period as stated by the appellant-Counsel. In the circumstances there is some force in the arguments advanced on behalf of the Department that there was nexus between goods supplied and deposits/advances received by the party from the customers in lieu of sale made to them as there was no activity other than manufacturing activity was carried on by the appellants. We are not convinced with the arguments advanced by the appellants that the Department has failed to prove that these deposits were used in the manufacture of excisable goods of the appellants. The appellants have taken the plea that they have not used the deposits/advances or any part thereof in the manufacture of excisable goods. Since they have collected the deposits amount from each and every buyer the burden lies on them to prove that such deposits have not been used for the purpose of manufacturing excisable goods or they have kept the such deposits amount separately since they have collected as security deposit. The plea was taken by them that it has not been used but the same was not substantiated. In the circumstances it is a fact that the appellants received the advances/deposits from their customers, which certainly enhance the working capital and will effect the assessable value and advances and deposits are additional value flowing indirectly from buyers to the assessee, and therefore, this money value is to be determined by the quantum of interest as it was held in the case of Britannia Industries Ltd. (supra) and as it was rightly argued by the learned JDR. The decision in the case of Mahavir Aluminium Ltd. referred to by the appellants is not applicable to this case since there were dealers who did not make any such deposits, yet the goods like kind and quality were sold to all the dealers at the same price in that case. In the facts and circumstances by giving credence to the case law referred to by the learned JDR, we do not find any infirmity in the impugned order and accordingly we uphold the impugned order. In the result the appeals filed by the party are hereby dismissed. Cross Objection filed by the Department also stand disposed of accordingly.