2021 (9) TMI 141 - AT - Central Excise

Valuation - disallowance of deduction from assessable value - deduction on interest on receivables and collection charges on the delay in payment for each invoice - period from 01.08.1990 to 31.12.1997 - section 4(1)(a) of the Excise Act - HELD THAT - The Tribunal noticed that the only issue before it was whether deduction on interest on receivables and collection charges should be based on the delay in payment for each invoice without any fixed percentage (i.e. 9.5%) or it should be @9.5%. This was for the reason that the Deputy Commissioner had recorded categorical findings that interest on receivables and bank charges were inbuilt in the value of the goods and, therefore, deduction was to be allowed. The Tribunal accepted the claim of the assessee and held that deduction on interest on receivables and bank charges has to be given based on the delay in payment for each invoice without any fixed percentage. The Assistant Commissioner was required to take a decision after remand from Supreme Court and even though the Assistant Commissioner had earlier required the Superintendent to submit a Verification Report, but he completely failed to take this Verification Report into consideration while passing the order date 31.12.2014 - The Assistant Commissioner held that the appellant was not entitled to claim deduction on account of bank charges and in regard to interest on receivables , the Assistant Commissioner held that the appellant had not submitted any documentary evidence to substantiate its version that interest an account of delay in payment was included/inbuilt in the price charged for the goods at the time of clearance. The Tribunal noticed that the only issue before it was whether deduction on interest on receivables and collection charges should be based on the delay in payment for each invoice without any fixed percentage (i.e. 9.5%) or it should be @9.5%. This was for the reason that the Deputy Commissioner had recorded categorical findings that interest on receivables and bank charges were inbuilt in the value of the goods and, therefore, deduction was to be allowed. The Tribunal accepted the claim of the assessee and held that deduction on interest on receivables and bank charges has to be given based on the delay in payment for each invoice without any fixed percentage. The Tribunal clearly observed that there was no dispute about the admissibility of deduction of interest on receivables from the assessable value in the case of the appellant and in view of the decision of the Supreme Court, deduction of actual interest receivable in respect of each invoice has to be allowed. This order of the Tribunal, which squarely covers the controversy involved in this appeal, has attained finality as learned counsel for the appellant stated that no appeal was filed by the Department to assail this order of the Tribunal and this fact has not been refuted by the learned Authorized Representative of the Department. A Division Bench of the Tribunal in ROSMERTA TECHNOLOGIES LTD. VERSUS COMMISSIONER OF CE ST, LTU DELHI 2019 (11) TMI 1573 - CESTAT CHANDIGARH also had an occasion to examine this contention. It was held that when for a subsequent period in the own case of the appellant it was held that service tax cannot be levied, which order had attained finality, the Department cannot be permitted to take a stand in the pending appeal that service tax is leviable. The order passed by the Commissioner (Appeals) cannot be sustained for this reason also - Appeal allowed.

Issues Involved:
1. Deduction of "interest on receivables" and "collection charges" from the assessable value.
2. Compliance with Supreme Court's directions regarding the inclusion of interest in the price structure.
3. Verification of documentary evidence to support deductions.
4. Consistency in the Department's stance on deductions for different periods.

Detailed Analysis:

1. Deduction of "Interest on Receivables" and "Collection Charges":

The appellant, engaged in manufacturing asbestos cement pipes, claimed deductions for "interest on receivables" and "collection charges" due to delayed payments by Government Departments. The Assistant Commissioner disallowed these deductions, resulting in a demand of ?1,79,63,423/- in Central Excise duty. The appellant argued that these costs were inbuilt in the price structure, supported by Chartered Accountant certificates and past experiences.

2. Compliance with Supreme Court's Directions:

The Supreme Court, in its judgment dated 05.05.2004, held that credit sales include cases where interest is inbuilt in the price structure. The Court directed that the issue of whether the price structure includes interest should be established by evidence. The Tribunal initially allowed deductions only to the extent mentioned in invoices, but the Supreme Court emphasized that the entire matter should be investigated, not limited to specific cases mentioned in invoices.

3. Verification of Documentary Evidence:

The Assistant Commissioner, following remand from the Supreme Court, required the appellant to produce records to establish that interest was incurred and inbuilt in the price. Despite the appellant submitting calculations and documentary evidence, including a verification report by the Superintendent, the Assistant Commissioner disallowed the deductions, citing a lack of documentary evidence to substantiate the claims.

4. Consistency in the Department's Stance:

For the subsequent period from January 1998 to June 2000, the Deputy Commissioner allowed deductions based on actual expenses but limited to 9.5%. This decision was upheld by the Tribunal, which emphasized that deductions should be based on actual interest receivables for each invoice, not a fixed percentage. The Tribunal's decision attained finality as the Department did not appeal against it. The Assistant Commissioner and Commissioner (Appeals) failed to consider this binding decision and instead relied on earlier orders, ignoring the Tribunal's findings.

Conclusion:

The Tribunal set aside the impugned order dated 06.03.2018 by the Commissioner (Appeals), allowing the appeal. The Tribunal emphasized that deductions for "interest on receivables" and "collection charges" should be based on actual interest receivables for each invoice, consistent with the Supreme Court's directions and the Tribunal's earlier binding decision. The Department cannot take a contrary stance for different periods, ensuring consistency in the application of law.

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