2009 (4) TMI 168 - AT - Central Excise

Valuation deduction / abatement from transaction value - The appellants, who arc manufacturers of Air Circuit Breakers and Control Panels and availing MODVAT credit facility, claimed 8.16% as abatement from the value of goods sold through depots as post-manufacturing expenses (PME) under various heads out of which 4.58% was claimed as interest on receivables held that - As the appellants have not discharged the burden of showing that the interest on receivables was inbuilt into the price charged, it is not deductible from the assessable value.

Summary

Issues:
1. Eligibility of abatement for interest on receivables in the value of goods sold.
2. Rejection of abatement claim by the Commissioner.
3. Burden of proof on the appellants regarding inbuilt interest in the price charged.

Analysis:

1. Eligibility of Abatement for Interest on Receivables:
The appellants, manufacturers of Air Circuit Breakers and Control Panels, claimed abatement from the value of goods sold through depots as post-manufacturing expenses (PME), including interest on receivables. The department contended that abatement for interest on receivables is only applicable if separately identified and collected from buyers after the general credit period. A show cause notice was issued for recovery, leading to appeals against the demand.

2. Rejection of Abatement Claim:
The appellants cleared goods to depots where they were sold to dealers with fixed trade discounts and other discounts based on payment terms. The appellants claimed abatement for trade discount and various post-manufacturing expenses. The Commissioner rejected the abatement claim citing the interest amount not being shown separately in depot invoices. However, the rejection was deemed insufficient as per legal precedents.

3. Burden of Proof on Appellants:
The Tribunal emphasized the appellants' failure to demonstrate that the price charged included an element of interest for buyers, as required by legal decisions such as A. Infrastructure Ltd. v. CCE and CCE, Hyderabad v. Novapan Industries Ltd. The burden of proof lay on the appellants to establish the inbuilt interest in the price, which they failed to do. Consequently, the interest on receivables was not deductible from the assessable value, leading to the rejection of the appeals based on established legal precedents.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Chennai upheld the department's decision to reject the abatement claim for interest on receivables in the value of goods sold, emphasizing the necessity for separate identification and collection of such interest as per legal requirements and burden of proof on the appellants to establish inbuilt interest in the price charged.