2007 (4) TMI 111 - AT - Central Excise

Valuation(Central excise) -Revenue contended that interest on advance is includible in the assessable value of good and accordingly demand were made - Held the revenue contention was not correct and set aside

Summary

Issues:
1. Inclusion of interest on advance payment in assessable value for goods supplied.

Analysis:
The appeal was filed against the Order-in-Appeal passed by the Commissioner of Central Excise, Bangalore, regarding the inclusion of interest on advance payment in the assessable value of goods supplied. The Revenue claimed that the interest on the advance should be included in the assessable value, citing the Metal Box India Ltd. case. The original authority demanded a differential duty, which was confirmed by the Commissioner (Appeals) based on the Bombay High Court decision in the Britannia Industries Limited case.

Shri Lakshminarayana represented the appellants, while Shri K. Sambi Reddy represented the Revenue. Both parties were heard during the proceedings. The appellants argued that the advance payment had no influence on the price of the goods supplied. They clarified that the advance was adjusted gradually as orders were executed, and it was given based on a Bank Guarantee with margin money and bank commission. The appellants contended that the advance was not utilized in production and that no nexus could be established between the price and the advance received.

The appellants relied on legal precedents to support their case. They cited the CCE, Jaipur v. Rural Engg. Co. Pvt. Ltd. case and the VST Industries Ltd. v. CCE, Hyderabad case, emphasizing that if advances did not influence the price or were not used as working capital, the interest element should not be included in the assessable value. They argued that the Revenue failed to provide evidence that the advances influenced the price of the goods. Consequently, the Tribunal set aside the impugned order and allowed the appeal with any consequential relief.

The Tribunal's decision was based on the lack of evidence showing a connection between the advance payments and the price of the goods supplied. As per legal precedents, if the advances did not impact the price or were not used as working capital, the interest on the advance should not be included in the assessable value. Therefore, the Tribunal ruled in favor of the appellants, highlighting the absence of merit in the Revenue's argument and providing consequential relief if applicable.