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TMI Blog1990 (8) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to the bulk of customers. 3. The Deptt. examined the matter and opined that the interest on the deposit should legitimately form additional element of value for assessement of the cigarettes cleared by the respondents. Therefore, the Deptt. proposed to include the notional interest @ 12% p.a. and to add this to the sale price to re-determine the asssessable value and to demand the differential value. The show cause notice alleged that in such circumstances, normal price has to be determined only under Rule 5 of the Valuation Rules, 1975. There was a further allegation in the show cause notice that the company received a sum of Rs. 35.01 lakhs towards freight service charges from the main dealers during the year 1982-83 and action was threatened under Rule 5 of the Valuation Rules in respect of this sum also. 4. After due process, the Asstt. Collector adjudicated the matter and confirmed a demand for over 2.23 crores of differential duty against the respondents on both the counts. The reasons given by the Asstt. Collector are best referred to by reproducing the operative part of the Order:- As regards the security deposit scheme, the party has mentioned that they resort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction on part with freight charges. In view of this, the freight service charges collected by the party during the year 1982-83 has to be added to the wholesale price of cigarettes in order to determine the correct assessable value in terms of Rule 5 of Valuation Rules 1975." 5. Aggrieved by the order, the Respondents filed appeals before the Collector (Appeals). The Collector allowed the appeal in so far as the interest on the deposits was concerned. Upholding the contention of the Respondents (appellants before us) he held that as the deposits were not taken from all the buyers uniformly, but only from buyers who wished to avail of credit facilities, the amounts calculated as notional interest did not constitute any financial returns to Respondents. On the second point, viz. Freight Service Charges, he rejected the appeal as the Respondents herein did not contest the demand in that regard. 6. Aggrieved by the order passed by the Collector (Appeals) in respect of the notional interest on the deposits, Revenue filed these 3 appeals before us. 7. We heard Shri L.P. Asthana, ld. JCDR for the Revenue (Earlier Shri Krishnamurthy Shri V.K. Sharma also argued) and Shri Anil De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether on delayed payments, interest was charged or not. The ld. Advocate answered in the affirmative. Referring to the grounds mentioned in the cross objections, Shri Anil Dewan further submitted that the Collector (Appeals) was wrong in directing the Asstt. Collector for finding extra evidence when on the basis of existing evidence the inclusion of the amount of interest for purposes of calculating central excise duty was not held proper. The ld. Advocate argued that there was no price deflection and the same price was charged to the dealers who made the deposits and to the dealers who did not. 13. Arguing that even if the interest is to be added, it should be added only to the price and not the assessable value. Shri Dewan submitted that Section 4 (1) (a) makes it quite clear that the addition should be to the realisation (wholesale price) and not to the assessable value. In this context, the Id. Advocate cited the following Judgments to support his proposition: 1989 (43) E.L.T. (165) SC, Hindustan Polymers v. CCE 1989 (41) E.L.T. (610) Tribunal, CCE v. Indian Oxygen Ltd. 1989 (39) E.L.T. (79) Tribunal, CCE v. Metal Box India Ltd. 1988 (35) E.L.T. (354) Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondents should be taken into consideration to arrive at the assessable value of the goods, viz. cigarettes. The Deptt. s ground is that such interest was a commercial consideration amounting to a flow-back to the Respondents and therefore, legitimately forms a part of the assessable value. The appellants plea is that the deposits are taken solely for the purpose of ensuring security when goods are given by them on credit to their dealers and payments are made later. In this context, we recall the question put by the Bench to the Respondents and reply to the effect that when payments are delayed, interest is charged by the Respondents. Therefore, we cannot accept as correct the plea that the deposits were simply to ensure security of the Respondents monies due from the dealers. On the other hand, the Asstt. Collector s order shows that in the reply to the show cause notice, the Respondents expressed that the deposits were taken to get the working capital requirements which had to be met by the company in a period of shrinking net realisations . The Respondents themselves, according to the Asstt. Collector s order, went on to say that an additional commercial consideration f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be considered for arriving at the assessable value is restored. 19. That brings us to the second and last question that is before us (the Freight Service Charges not being an issue before us). It was the Deptt. s case, from the beginning, that the amount of notional interest should be worked into the value through Section 4 of the Act read with Rule 5 of the Central Excise Valuation Rules. This Rule is reproduced below : Where the excisable goods are sold in the circumstances specified in clause (a) of sub-Section (1) of Section 4 of the Act except that the price is not the sole consideration the value of such goods shall be based on the aggregate of such price and the amount of ...of the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. 20. It was never the case of Revenue and it cannot be made out now that any of the dealers were related persons of the Respondents. There is no evidence to hold so, apart from such a ground not being admissible at this stage. Therefore, it can only be that sales are independent except that in view of the findings given by us above, the price was not the sole consideration. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese amounts were part of the assessable value. The Respondents cited [Indian Oxygen 1989 (41) E.L.T.610J, especially, paragraphs 14 15. In para 14, the Tribunal ordered that delivery and handling charges constitute a part of the assessable value as they make up the price of the goods ex-factory. Such charges, therefore, will have to be added to the price declared by the manufacturer. 23A. The Tribunal in Metal Box India (P) Ltd. -1989 (39) E.L.T. 79 held that additional consideration in terms of money value flowing directly or indirectly from the buyer in any form should be added to the declared price for determining the normal price. 24. In our opinion, the various Judgments cited by the Revenue wherein it was held that extra accrual should be added to the assessable value should be interpreted to mean that assessable value should be calculated after adding the extra accruals to the sale price (whole sale price). It is so because the Supreme Court in Ponds- (Supra) made the position very clear. In para 12 of the Hindustan Polymers 1989 (43) E.L.T. 165 (SC) the Supreme Court observed as follows : To construe new Section 4 as now suggested would amount to departing from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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