2016 (1) TMI 820 - SC - Central Excise

Valuation - inclusion of notional interest in advances - Depression of assessable value of the goods - short payment of duty - respondent-assessee had obtained certain advance sums from some companies/users to supply the bottles and on that count it had granted 3-4 per cent discount - Held that - In the present case, there has to be application of mind by the tribunal regard being had to the amount of money paid by purchasers, namely, M/s. Coca Cola India and M/s. Pepsico India Holdings Pvt. Ltd. and what is the effect of the sales made to the two companies in percentile terms, whether this had the effect of depressing the sale price. The onus would be on the revenue. That being the thrust of the matter, liberty is granted to the revenue to produce the documents in this regard to discharge the onus. As we are remitting the matter, we may note one submission of the respondent-assessee. It is urged by the learned counsel that when the entire activities were within the knowledge of the excise authorities, penalty is not leviable. Needless to emphasize, the tribunal shall advert to the said submission, if required, in the ultimate eventuate, in proper perspective. In the result, the appeal is allowed, the order passed by the tribunal is set aside and the matter is remitted to the tribunal for fresh disposal keeping in view the observations made herein-above. We may hasten to clarify that we have not expressed any opinion on any of the aspects.

Summary

Issues:
Alleged under-valuation of goods leading to duty evasion by not adding additional consideration received from customers in the form of advance, resulting in depression of assessable value of goods.

Detailed Analysis:

Issue 1: Alleged under-valuation of goods and duty evasion
The case involved a show cause notice issued to the respondent company for not adding additional consideration received from customers in the form of advance payments, leading to under-valuation of printed glass bottles. The notice alleged that this resulted in a depression of the assessable value of the goods, prompting the demand of duty and imposition of penalties under the Central Excise Act, 1944.

Issue 2: Tribunal's decision and remand
Upon appeal, the Customs, Excise and Service Tax Appellate Tribunal heard the case and had a difference of opinion among its members. The Member (Technical) found that the revenue failed to prove a link between the advances and the depression of prices, thus rejecting the demand and penalty. However, the Member (Judicial) remanded the matter back to the Commissioner for fresh examination based on established principles and the need for evidence to establish the impact of advances on pricing.

Issue 3: Supreme Court's analysis and decision
The Supreme Court analyzed precedents such as Metal Box India Ltd. and Hero Honda Motors Ltd. to determine the relevance of notional interest on assessable value. The Court emphasized the need for a clear connection between advances received and price depression, placing the onus on the revenue to establish this link. The Court granted liberty to the revenue to produce necessary documents to discharge this onus and remitted the matter back to the tribunal for a fresh decision, without expressing any opinion on the case's merits.

In conclusion, the Supreme Court allowed the appeal, set aside the tribunal's order, and remitted the case for fresh disposal, emphasizing the need for evidence to establish the impact of advance payments on the pricing structure. The Court clarified that the onus lies on the revenue to prove any depression in sale prices due to advances received, leaving the final decision to the tribunal while considering all relevant aspects.