Samarpan Fabricators Ltd. Vs. Collector of C. Ex. - Court Judgment

Excerpt:
1. appellant, engaged in the manufacture of tailormade packaging machinery, was paying duty on approved prices. in respect of 19 contracts, it was found that the appellant had received advances ranging from rs. 5,000/- to rs. 2 lacs as against contractual price ranging from rs. 37,000/- to rs. 4.8 lacs, retained for a period ranging from one month to 18 months. show cause notice was issued proposing demand of differential duty on the notional interest on the amounts of advance. though the appellant resisted the notice, the assistant collector confirmed the demand. this order having been confirmed in appeal, the assessee has filed the present appeal.2. the assistant collector indicated that deposits are similar to bank loans, that it is not acceptable that the appellant did not keep the.....

Judgment:
1. Appellant, engaged in the manufacture of tailormade packaging machinery, was paying duty on approved prices. In respect of 19 contracts, it was found that the appellant had received advances ranging from Rs. 5,000/- to Rs. 2 lacs as against contractual price ranging from Rs. 37,000/- to Rs. 4.8 lacs, retained for a period ranging from one month to 18 months. Show cause notice was issued proposing demand of differential duty on the notional interest on the amounts of advance. Though the appellant resisted the notice, the Assistant Collector confirmed the demand. This order having been confirmed in appeal, the assessee has filed the present appeal.

2. The Assistant Collector indicated that deposits are similar to bank loans, that it is not acceptable that the appellant did not keep the amounts in deposit in bank and in the face of such facts it was unnecessary to establish separately nexus between deposits and the price. The above approach of the original authority is not fully correct. Nexus has to be established between the advance amounts and the price as the statutory authority must be satisfied that the receipt of advance did influence the price. This aspect of the advance amount influencing the price was not considered by the Assistant Collector.

3. Collector (Appeals) considered this aspect. During the personal hearing he specifically asked the appellant whether final price of the equipment would increase if advance is not taken by the appellant and the answer of the appellant was in the affirmative. Shri Anand appearing for the appellant who was also appearing before the Collector (Appeals) along with the Consultant stated that such an answer was given by mistake. The answer was given in the presence of the Consultant as well as the C.A. The. present appeal memo does not indicate that either of them had committed any mistake. The appeal memo also does not state that the price remains same whether advance is taken or is not taken from customers. Hence the necessary inference is that the receipt of advance amounts clearly influenced and depressed the price. It is contended that the rate of notional interest adopted at 18.5% was too high. This contention raised before the Collector (Appeals) was overruled on the ground that it was not raised before the Assistant Collector. This does not appear to be the correct approach.

We are dealing in this case with the period 1989-90. The adjudicating authority should have made some enquiry with the banks as to the interest they pay on receipt of advance and the interest they charge for commercial loans. Having regard to the present rate of interest and the period in question, we reduce the percentage of notional interest to 15%. Demand will be re-quantified on this basis. The impugned order is set aside to the extent indicated above and the case is remanded to the jurisdictional adjudicating authority for passing a fresh order after granting the appellant opportunity of hearing.