2023 (5) TMI 378 - AT - Central Excise

Valuation - inclusion of notion interest on the advances taken from the customer in the assessable value of the goods or not - HELD THAT - Issue has been considered by the tribunal and various courts time and again. It is settled principle that unless and until the revenue shows that advances have earned interest on such advances and the prices to final buyer has been depressed they could not have been added this notional interest to the assessable value - Reliance can be placed in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III VERSUS PAPER PRODUCTS LTD. 2009 (4) TMI 187 - CESTAT, MUMBAI . Valuation rule also provide that notional interest on advances could have been added to the assessable value only if the same depresses the value of the goods. There are no merits in the impugned order same is set aside - appeal allowed.

Summary

Issues involved: The judgment deals with the imposition of Central Excise duty on interest accrued on advances received against clearances made, the imposition of a penalty, and the recovery of interest at an appropriate rate.

Central Issue: Impugned duty of notion interest on advances in assessable value:
The Commissioner of Central Excise Appeals upheld the imposition of Central Excise duty on interest accrued on advances received against clearances made. The appellant argued that they did not earn any interest on the advances received from customers and thus should not be liable for the duty. The appellant presented a Chartered Accountant certificate stating that no interest was earned on the advances. The tribunal referenced previous decisions to establish that notional interest on advances could only be added to the assessable value if it depressed the value of the goods. The tribunal held that the revenue failed to prove a nexus between the advances received and the sale price of the goods, ultimately setting aside the impugned order.

Judgment Details:
The Commissioner of Central Excise Appeals upheld the demand notices for Central Excise duty on interest accrued on advances received against clearances made. A penalty was imposed on the appellant under Rule 173Q of the Central Excise Act, 1944, along with an order for the recovery of interest at an appropriate rate. The Commissioner found that notional interest on the advance deposit is an opportunity cost and cannot be ignored, especially in the case of tailor-made items supplied to different customers at different prices. The tribunal, after considering the arguments presented by both parties, set aside the impugned order as the revenue failed to establish a nexus between the advances received and the sale price of the goods, as required by valuation rules and previous decisions.

Separate Judgment:
No separate judgment was delivered by the judges in this case.