2018 (3) TMI 401 - AT - Central Excise

Deduction on account of interest on receivables - case of Revenue is that that the deduction on account of free replacement of breakages and interest on receivables is not admissible - Held that - the invoices issued by the Appellant provides for 21 days credit. This period is to be reckoned for the purpose of deduction on account of interest on amount receivables for credit period as the Appellant were claiming/ borrowing funds from the bank - the deduction claimed by the Appellant has to be allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appellants claiming deduction on account of 'interest on receivables' disallowed by Commissioner (Appeals).

Analysis:
The Appellants challenged the deduction disallowed by the Commissioner (Appeals) specifically regarding interest on receivables. The Appellant's representative argued that the interest incurred during the credit period is embedded in the price as they borrow funds during the credit period, supported by references to legal precedents like the Apex Court judgment in the case of MRF Ltd. and Tribunal's judgments in various cases. The Appellant contended that once the revenue accepted a principle in an earlier case, it cannot take a contrary stand in subsequent cases, citing judgments in support of this argument. The Appellant's stance was to claim the deduction on the interest on receivables.

The revenue, represented by the Assistant Commissioner, supported the impugned order and relied on the judgment of the Hon'ble Apex Court in the case of A. Infrastructure Ltd. The Appellate Tribunal noted that the issue of free replacement of breakages was not appealed against and thus settled in favor of the revenue. The Tribunal focused on the deduction disallowed for 'interest on receivables,' finding that the invoices issued by the Appellant provided for a 21-day credit period during which they borrowed funds from the bank incurring interest. The Tribunal observed that this fact was undisputed by the adjudicating authority. Additionally, the Tribunal highlighted that in the Appellant's own previous case, the Tribunal had allowed the deduction on the same grounds. Consequently, the Tribunal held that the Appellant was eligible to claim the deduction on account of 'interest on receivables' and modified the impugned order to allow the deduction.

In conclusion, the appeals were partly allowed by the Appellate Tribunal, with the modification in the impugned order to permit the deduction claimed by the Appellant on account of 'interest on receivables.' The judgment was pronounced in court on 31/01/2018.