1993 (7) TMI 178 - AT - Central Excise

Summary

Issues Involved:
1. Deduction of expenses for breakages, repairs, service charges, and rental charges for bottles and crates.
2. Deduction of bank interest and administrative expenses.
3. Free supply of bottles as trade discount.

Issue-wise Detailed Analysis:

1. Deduction of Expenses for Breakages, Repairs, Service Charges, and Rental Charges for Bottles and Crates:

The appellants claimed deductions for expenses incurred due to breakages of glass bottles and wooden crates, repairs of the wooden crates, service charges, and rental charges for empty bottles and wooden crates. The Tribunal noted that repairs indicate repeated use of crates, leading to repeated deductions, which is not permissible. The cost of breakages and repairs is not included in the price of aerated water, and thus, cannot be deducted. The Supreme Court in Union of India v. Bombay Tyres International held that post-manufacturing operations and expenses incurred after delivery to the buyer cannot be deducted. The Tribunal found that the appellants failed to show how these costs were included in the price of aerated water. The Tribunal also referenced previous decisions, noting that in those cases, the issues were different and not related to valuation under Section 4 of the Act. The Tribunal concluded that the cost of packing not included in the value of excisable goods cannot be deducted.

2. Deduction of Bank Interest and Administrative Expenses:

The appellants argued that interest paid on bank loans for purchasing glass bottles and wooden crates should not be included in the assessable value. The Tribunal noted that the cost of these packing materials was not included in the declared prices, and no deduction could be made on a notional basis. The Tribunal referenced the Supreme Court's decision in Bombay Tyres International, which emphasized that deductions depend on the nature of the claims. The Tribunal also noted that loans for manufacturing activities are part of the manufacturing process, and thus, interest on such loans cannot be deducted. Regarding administrative expenses, the Tribunal stated that these expenses are integral to the manufacturing process and cannot be excluded from the assessable value. The Supreme Court in Bombay Tyres International had observed that expenses contributing to the value of goods up to the date of sale are liable to be included.

3. Free Supply of Bottles as Trade Discount:

The appellants claimed that they provided free coupons to dealers, which could be exchanged for products. However, there was no mention of these coupons in the invoices, and no discount was given at the time of clearance. The Tribunal noted that a trade discount must be a deduction from the declared price allowed to the buyer by the manufacturer. In this case, there was no evidence of the scheme, no specification of the quantity to be purchased for eligibility, and no evidence of actual exchanges of free coupons. The Tribunal cited the case of Orient General Industries Ltd. v. Collector, Central Excise, New Delhi, where it was held that special incentive bonuses are not trade discounts but contingent rewards and thus includible in the assessable value. The Tribunal concluded that there was no basis for allowing such a discount in the absence of evidence.

Conclusion:

The Tribunal found no merit in the appeals as the appellants failed to substantiate their claims with documentary evidence. The claims were general in nature, and no proof of actual expenditure was provided. The Tribunal emphasized that deductions must be supported by evidence and formal agreements, which were lacking in this case. Consequently, all three appeals were rejected.