2017 (8) TMI 355 - AT - Central Excise

Valuation - notional interest on advances received - includibility - Held that - As per CEBC s circular No.404/37/98-Cx dated 22.6.1998, it has been clarified that if the selling price is influenced in that case notional interest on advances received from the buyers, the notional interest is required to be added in the assessable value - in the present case, the selling price of the goods to the buyers who paid duty advance has not been influenced, therefore, notational interest is not required to be added in the assessable value - demand set aside. Valuation - the discounts shown in the invoices is actually not given to the buyers and debit notes raised by the appellant on the buyers - demand of duty on discounts - Held that - a verification report was sought by the adjudicating authority from the Range Superintendent, who after due verification of the records, has filed report that wherever the appellant has given discount but actually not passed on to the customers, they have paid duty - no demand is sustainable against the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether notional interest should be added to the assessable value.
2. Whether duty is required to be paid on discounts shown in invoices not given to buyers and debit notes raised by the appellant.

Issue No.1:
The Circular No.404/37/98-Cx dated 22.6.1998 states that notional interest should be added to the assessable value if the selling price is influenced by advances received from buyers. In this case, the appellant paid interest higher than the bank lending rate to buyers who made advance deposits. However, the selling price to buyers who paid in advance was not influenced as per the selling policy, where discounts were offered for prompt payment. Therefore, notional interest does not need to be added to the assessable value, as acknowledged by the adjudicating authority, leading to setting aside the demands related to notional interest.

Issue No.2:
During adjudication, a verification report from the Range Superintendent confirmed that where discounts were shown but not passed on to customers, duty was paid by the appellant. Additionally, the report verified the duty payable on debit notes issued by the appellant, which was accepted by the learned AR. Consequently, no sustainable demand exists against the appellant in this context. The demands raised in the impugned orders were set aside based on the correctness of the Superintendent's report, confirming that any duty payable by the appellant had been paid. No duty is required to be paid on notional interest, and no penalty is applicable to the appellant. Therefore, the impugned orders were overturned, and the appeals were allowed with consequential relief.

This judgment clarifies the treatment of notional interest and duty obligations concerning discounts and debit notes, providing a detailed analysis of each issue and the factors considered in reaching the decision.