2015 (5) TMI 526 - AT - Central Excise

Valuation of goods - Suppression of value - inclusion of notional interest - Held that - Contract value has not been reduced due to advance taken and in case of higher advances, the value is lower. In the list given in the show cause notice, it is seen that in large number of cases, the advance amount is 10% of the contract value and in few cases the advances are in the range of 20 to 25%. However, the show cause notice does not give the value of the lifts where the advances in the higher range have been taken and in the absence of such details, it cannot be said that the contract value is suppressed or reduced due to higher advance taken. - until and unless the Revenue is able to prove that the value is suppressed due to the advances taken, the notional interest cannot be added. - Decided in favour of assessee.

Summary

Issues: Valuation of goods based on advances taken; Allegation of reduced value due to advances; Adding notional interest on advances

Valuation of goods based on advances taken:
The case involved the appellant, engaged in the manufacture, erection, and commissioning of lifts, facing a dispute with the Revenue regarding valuation. The department alleged that the contract value was affected by the advances taken from customers, leading to a reduction in value for assessment purposes. The appellant contended that the value of goods was not impacted by the advances, emphasizing that the quantum of advance varied based on the customer and was unrelated to the contract value. The appellant argued that the advances were not indicative of a lower contract value, citing examples where more advance was taken for higher contract values. The Tribunal analyzed the show cause notice and order-in-original, finding no evidence to support the Revenue's claim that higher advances resulted in lower contract values.

Allegation of reduced value due to advances:
The Revenue alleged that the value of goods had been depressed or reduced in cases where higher advances were received from customers. The department argued that under the new Section 4, the interest on advances should be considered as additional consideration, justifying the impugned order demanding duty payment based on notional interest on advances. However, the Tribunal, after considering submissions from both sides and reviewing the original order and the Commissioner (Appeals) order, found no support for the Revenue's claim that contract values were reduced due to advances taken. The show cause notice lacked specific details to establish that higher advances led to suppressed contract values.

Adding notional interest on advances:
The Tribunal referred to settled principles established in various judgments, stating that unless the Revenue could demonstrate that the value was suppressed due to advances, notional interest could not be added. Citing precedents from the Tribunal and higher courts, the Tribunal emphasized that the burden of proof lay with the Revenue to show that advances directly impacted the contract value. Based on the settled law on the subject, the Tribunal allowed the appeal, indicating that the notional interest on advances could not be added without concrete evidence of value suppression.

In conclusion, the judgment addressed the issues of valuation based on advances, allegations of reduced value due to advances, and the addition of notional interest on advances. The Tribunal ruled in favor of the appellant, emphasizing the lack of evidence supporting the Revenue's claims and highlighting the necessity for concrete proof to justify adding notional interest.