2011 (8) TMI 757 - AT - Central Excise

Assessable Value - Interest on Receivables - Held That - interest on receivables being inbuilt in price which had not been charged separately is deductible from assessable value. (Commissioner of Central Excise, Hyderabad vs Novapan Industries Ltd (2007 - TMI - 1073 - SUPREME COURT OF INDIA))

Summary

Issues:
Appeal against Commissioner (Appeals) order on deduction of interest on receivables in assessable value.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Mumbai was filed by the Revenue challenging the Order of the Commissioner (Appeals), Mumbai. The case revolved around the respondents claiming deductions on trade discount, quantity discount, distribution expenses, turnover tax, interest on receivables, and breakages from their sale price for stock transfers in the period April 1999 to March 2000. The Revenue issued a show-cause notice proposing disallowance of the discounts claimed due to lack of substantiation. The Dy. Commissioner, in Order-in-Original No. 8/2002, dropped the proceedings initiated against the respondents. However, the department appealed to the Commissioner (Appeals) seeking to set aside the original authority's decision. The Commissioner (Appeals) rejected the department's appeal and allowed the deduction on account of interest on receivables, leading to the Revenue's appeal before the tribunal.

During the proceedings, the ld. SDR for the Revenue acknowledged that the issue of adding interest on receivables to the assessable value had been settled by the Supreme Court in a previous case. The Supreme Court, in Commissioner of Central Excise, Hyderabad vs. Novapan Industries Ltd., held that interest on receivables, when not charged separately and forming part of the price, is deductible from the assessable value. On the other hand, the respondents' representative argued that both the original authority and the Commissioner (Appeals) ruled in their favor, emphasizing the need to dismiss the Revenue's appeal in light of the Supreme Court's decision.

After considering the arguments and reviewing the case records, the tribunal identified the central issue as the addition of interest on receivables to the assessable value of the goods manufactured by the respondents. Given the Supreme Court's clear precedent that interest on receivables is deductible from the assessable value, the tribunal found no fault in the Commissioner (Appeals) order and upheld the decision. Consequently, the tribunal dismissed the Revenue's appeal, affirming the allowance of the deduction on interest on receivables in the assessable value of the goods.