1991 (7) TMI 94 - HC - Central Excise

Refund - Duty paid under protest - Valuation - Post-manufacturing expenses - Bonus to dealers - Interest and bank charges on drafts

Issues Involved:
1. Freight & Transportation charges for specific months.
2. Bonus to dealers.
3. Commission to agents.
4. Secondary packing.
5. Interest on security deposits from dealers and agents.
6. Interest on dealers' deposits against direct despatches.
7. Interest and bank charges on drafts.

Detailed Analysis:

(i) Freight & Transportation:
The claim for abatement on freight and transportation charges for the months of July and August 1981 and April and July 1982 was disallowed by the Assistant Collector due to the absence of the endorsement "duty paid under protest" on gate-passes, as required by Rule 233B. However, the court found that the duty was indeed paid under protest, supported by a covering letter, and thus rejected the Assistant Collector's ground for disallowance. The court concluded that the assessee is entitled to claim abatement for these months.

(ii) Bonus to Dealers:
The Assistant Collector disallowed the deduction for bonus to dealers, stating it was not ascertainable at the time of removal of goods and was incurred post-delivery. The court, however, accepted the assessee's argument that the bonus is a trade discount ascertainable prior to the removal of goods, as established by trade practice. The court referenced its own decision in a similar case (Advani-Oerlikon Limited) and the Supreme Court's decision in Bombay Tyre International. The matter was remanded back to the Assistant Collector for quantification after verification.

(iii) Commission to Agents:
Similar to the bonus to dealers, the commission to agents was disallowed by the Assistant Collector on the grounds that it was not ascertainable at the time of removal. The court disagreed, noting that the commission was part of the agency agreement and ascertainable prior to the removal of goods. The court remanded the matter back for quantification subject to verification.

(iv) Secondary Packing:
The claim for secondary packing expenses was disallowed due to lack of specific evidence from the assessee. The Assistant Collector noted that the assessee failed to provide details on whether special packing was requested by specific buyers. The court upheld this finding, stating that the assessee did not substantiate the claim with necessary material, making it a pure finding of fact that cannot be disturbed.

(v) Interest on Security Deposits from Dealers and Agents:
The claim was disallowed on the grounds that the deposits were used as working capital. The court referenced a Division Bench decision in Britannia Industries Ltd., which supports the rejection of this claim. Therefore, the court confirmed the disallowance.

(vi) Interest on Dealers' Deposits against Direct Despatches:
This claim was similarly disallowed, with the court again referencing the Britannia Industries Ltd. decision. The court confirmed the disallowance, agreeing that such interest does not qualify for deduction as it is part of the working capital.

(vii) Interest and Bank Charges on Drafts:
The claim for interest and bank charges on drafts was disallowed by the Assistant Collector, stating these expenses were incurred post-delivery and contributed to the value and marketability of the goods. The court disagreed, noting that these expenses are post-manufacturing and deductible under Section 4 of the Central Excises and Salt Act, 1944. The matter was remanded back for verification of the deductible amount.

Conclusion:
The court set aside the Assistant Collector's orders partially, confirming the rejection of claims for secondary packing, interest on security deposits from dealers and agents, and interest on dealers' deposits against direct despatches. The matters of freight and transportation charges, bonus to dealers, commission to agents, and interest and bank charges on drafts were remanded back for recalculating permissible deductions. The Assistant Collector was directed to reconsider these issues in light of the court's observations. The rule was made partly absolute with no order as to costs.

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