1988 (8) TMI 98 - SC - Central Excise

Whether the rentals of the cylinders and the notional interest earned on the deposit of cylinders were includible in the value under Section 4 of the Act/ Held that - It is a case of two different supplies. One is supply of gases and the other is incidental supply of cylinders for rent. In that view of the matter, in our opinion, the Tribunal was right in the view it took. The interest, notional or real, accruing on deposits for the safe return of cylinders as well as the rentals would not constitute part of the assessable value. The order of the Tribunal needs no interference. The appeals, accordingly, fail and are dismissed.

Summary

Issues:
1. Inclusion of rentals and notional interest in the assessable value under Section 4 of the Central Excises & Salt Act, 1944.
2. Interpretation of Section 4(1)(a) of the Act regarding the normal price of excisable goods.
3. Application of the proviso to Section 4(1)(a) in cases of different classes of buyers.
4. Determining whether rentals for cylinders and notional interest income are part of the assessable value under the Act.

Analysis:
The judgment involves appeals under Section 35L(b) of the Act against the decision of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) regarding the inclusion of rentals and notional interest in the assessable value. The dispute revolves around whether these amounts should be considered part of the assessable value under Section 4 of the Act. The revenue contends that these amounts should be included, while the respondent argues that they were not included in the price list for assessment purposes, as the deposits were taken only to ensure the return of gas cylinders.

The Asstt. Collector Central Excise held that the respondent had to pay excise duty on the interest earned and included rentals of cylinders in the value. The Collector of Central Excise, Madras, upheld this order with modifications. However, the CEGAT, in its order, deleted rentals for cylinders and interest accrued on deposit receipts from the value, stating that these charges were not related to the cost of manufacture of the goods. The Tribunal's decision was based on the understanding that the supply of gas cylinders was ancillary to the supply of gases and not incidental to manufacturing activities.

The judgment clarifies that excise duty is levied on the manufacture of goods, and the normal price of excisable goods is crucial for determining the assessable value under Section 4(1)(a) of the Act. It references previous cases to explain the scope of Section 4 and emphasizes that charges like rentals for cylinders and notional interest income are ancillary or allied services, not part of the manufacturing process. The judgment rejects the revenue's argument that different classes of buyers justify different prices under the proviso to Section 4(1)(a), stating that these charges are not part of the manufacturing activity.

Ultimately, the Tribunal's decision to exclude rentals for cylinders and notional interest income from the assessable value is upheld, as these charges are deemed ancillary and not constituting part of the value for excisable goods. The appeals are dismissed, and no costs are awarded.