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2023 (9) TMI 9 - AT - Central ExciseDeduction of interest on receivables from the assessable value - HELD THAT - The interest on receivables has been deducted on the basis of the purchase orders and invoices wherein it is clearly mentioned that the interest on receivables is on account of credit period and interest for the credit period is inbuilt in the price. This issue has been considered by various benches of the Tribunal and it has been consistently held that interest on receivables is admissible to the assessee even when the interest is inbuilt in the price in invoice. It is also found that the department cannot demand duty arising due to accounting treatment adopted by the appellant as held in the case of FIRM FOUNDATIONS HOUSING PVT. LTD. VERSUS PRINCIPAL COMMISSIONER, OFFICE OF THE PRINCIPAL COMMISSIONER OF SERVICE TAX 2018 (4) TMI 613 - MADRAS HIGH COURT wherein the Hon ble High Court set-aside the demand of service tax computed on the basis of profit loss account and held that it is irrelevant for the purposes of determination of service tax payable. When the demand of tax itself is not sustainable, the demand for interest and penalty is not justified. The impugned order is not sustainable - Appeal allowed.
Issues involved:
The deduction of interest on receivables from the assessable value. Summary of the Judgment: Issue 1: Deduction of interest on receivables from the assessable value The appeals were against an order rejecting the appellant's appeals and upholding the demand of excise duty on the deduction of interest on receivables from the assessable value. The appellant contended that interest for the credit period was included in the price as per purchase orders and invoices, making it eligible for deduction. They argued that the legislative intention was clear regarding interest on receivables. The appellant cited various judgments supporting their claim, emphasizing that interest on receivables should be excluded from the assessable value. They also highlighted that in a previous case for a different period, the department had allowed such deduction, indicating inconsistency. The appellant further argued that the impugned order went beyond the show cause notice and violated natural justice principles. They claimed that since the tax demand itself was unjustified, the penalties should not be imposed. The appellant relied on legal precedents to support their arguments. The Department reiterated the findings of the impugned order. Decision: The Tribunal found that interest on receivables was deducted based on purchase orders and invoices explicitly mentioning the interest for the credit period. Referring to a department circular, it clarified that delayed payment charges should be excluded from the transaction value if separately indicated in the invoice. The Tribunal noted that various Tribunal benches consistently held that interest on receivables, even if part of the price, should be admissible to the assessee. Additionally, the Tribunal highlighted that in a previous case involving the same appellant, the deduction of interest on receivables was allowed without any appeal from the department, establishing a precedent. The Tribunal emphasized that the department could not demand duty based on the appellant's accounting treatment, citing a relevant case. Regarding interest and penalty, the Tribunal ruled that if the tax demand itself was not sustainable, the imposition of interest and penalties was unjustified. Consequently, the Tribunal set aside the impugned order, allowing the appeals of the appellant with any consequential relief as per law. *(Pronounced on 29.08.2023)*
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