2011 (5) TMI 752 - AT - Central Excise

Interest - quantum of deduction available to the appellant when in the remand proceeding the appellant did not succeed before authorities Held that - interest has to be shown separately in the invoice. But such a plea is not supported by law when no provision of law was shown to us for appreciation. Once the deciding factor is lapse of time in between the delivery of goods and realization of money, that becomes basis for calculation of interest in respect of each amount involved in the invoice concerned, order of the appellate authority set aside and appeal allowed

Summary

Issues:
1. Admissibility of deduction of interest on receivables while determining assessable value.
2. Quantum of deduction available to the appellant.
3. Application of average rate or actual interest receivable for deduction.
4. Interpretation of Apex Court judgment on the deduction of interest on receivables.
5. Requirement of showing interest separately in the invoice.

Analysis:

1. The central issue in this case is the admissibility of deduction of interest on receivables while determining the assessable value. The Hon'ble Supreme Court, in a previous judgment, concluded that interest on receivables is to be deducted from the assessable value. The Court remanded the matter to ascertain the claim of receivables based on the time lapse between the delivery of goods and realization of money.

2. The controversy arises regarding the quantum of deduction available to the appellant. Despite the clear directive from the Apex Court, the authorities below failed to implement the judgment effectively. The appellant sought to claim deduction on the actual basis of interest receivable on each invoice, emphasizing that interest being time-related and value-based should be an admissible deduction.

3. The key question is whether the deduction should be based on an average rate or the actual interest receivable. The appellant argued for deduction on the actual basis for each invoice without applying an arbitrary percentage. The Tribunal noted that interest, being time-related and value-based, should be allowed as a deduction without the application of an average formula.

4. The interpretation of the Apex Court judgment is crucial in this case. The Tribunal emphasized that the deduction of actual interest receivable in respect of each invoice should be allowed, as per the law laid down by the Apex Court. The Tribunal highlighted the importance of reducing litigation by following the clear directives of the Apex Court in determining the admissibility of deductions.

5. Lastly, the requirement of showing interest separately in the invoice was discussed. The Tribunal noted that such a plea is not supported by law unless a specific provision was shown for appreciation. The basis for calculating interest should be the lapse of time between the delivery of goods and the realization of money, which forms the foundation for determining interest on each amount involved in the invoice. Consequently, the order of the appellate authority below was set aside, and the appeal of the appellant was allowed.