2007 (9) TMI 89 - AT - Central Excise

Interest Valuation Assessee receives sale proceeds through bank of buyer with out getting any additional monetary benefit Since appellant is not involved in buyer s settings with bank, then interest paid by buyer to bank for delay in remittances are not includible in assessable value

Summary

Issues:
Assessable value determination based on interest paid under 'Bill Marketing Scheme' (BMS) by buyer to their bankers.

Analysis:
The appellants supplied products to a buyer under a BMS where they allowed a cash discount subject to prompt payment by the buyer. The buyer paid the discounted price immediately to the appellants, who then received payments from the buyer's bank. The bank received interest from the buyer due to delayed remittances, equal to the discount allowed by the appellants. The Commissioner included this interest in assessable values, leading to differential duty demands and penalties. The question was whether the interest paid by the buyer to their bank under the BMS should be part of the assessable value.

Upon examination, it was found that the appellants only received the discounted price, not the interest paid by the buyer to their bank. Circulars clarified that the net price after cash discount must be the assessable value. The BMS was not bill discounting, and the appellants were not involved in the financial arrangement between the buyer and their bank. The Tribunal cited a case where a similar decision was upheld by the Supreme Court but noted the factual differences in the present case.

Referring to a previous order-in-appeal, which held that interest paid by the buyer to their bank should not be included in assessable value, the Tribunal appreciated the Commissioner (Appeals)'s viewpoint. As the DR did not contest the finality of the order-in-appeal, the Tribunal set aside the impugned orders and allowed the appeals.

In conclusion, the Tribunal ruled that the interest paid under the BMS arrangement by the buyer to their bank should not be included in the assessable value of the goods, based on the principles of cash discount and prompt payment. The decision was supported by relevant circulars and previous orders, ultimately leading to the appeals being allowed.