2012 (10) TMI 640 - AT - Central Excise

Waiver of pre-deposit includibility of notional interest on advances received from the customers Held that - Mere receipt of an advance will not ipso facto lead to the conclusion that the transaction price has been depressed unless there is a positive evidence in that regard - no such positive evidence led by the department to prove that the transaction value has been depressed on account of receipt of advances received the buyer - Explanation in Rule 6 itself makes it clear that including interest notionally on the advances received from the buyer is not permissible - waiver of pre-deposit granted

Summary

Issues:
- Inclusion of notional interest on advances in the assessable value of goods for excise duty calculation.

Analysis:
The case involved a dispute regarding the inclusion of notional interest on advances in the assessable value of goods for excise duty calculation. The appellant, a manufacturer of machinery, received interest-free advances from a customer for manufacturing goods. The department contended that notional interest on these advances should be added to the transaction value of the goods for excise duty purposes. The department issued a notice demanding differential duty, penalty, and interest. The matter had been previously remanded by the Tribunal for fresh consideration based on the appellant's submission that the advances were not utilized as working capital. The appellant produced a certificate from a Chartered Accountant supporting their claim that the advances were general in nature and not working capital.

The adjudicating authority confirmed the duty demand as the appellant did not produce the records supporting the Chartered Accountant's certificate. The authority inferred that the receipt of advances influenced the price of goods supplied, leading to the inclusion of notional interest in the assessable value. The appellant contested this decision, citing judicial pronouncements where it was held that notional interest on advances is not includible in the assessable value if the price is not influenced by the advances. The appellant relied on various tribunal judgments to support their argument.

Upon careful consideration, the Tribunal referred to Rule 6 of the Central Excise Valuation Rules, which states that notional interest on advances should not be added to the value unless there is evidence that the advance influenced the price. The Tribunal noted that there was no positive evidence provided by the department to prove that the transaction value was depressed due to the advances. Citing previous judicial pronouncements, the Tribunal held that including notional interest on advances without evidence is impermissible. Consequently, the Tribunal found in favor of the appellant, granting a waiver of pre-deposit of dues and staying the recovery during the appeal process.