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TMI Blog1993 (6) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... es against supplies, from their customers, and the interest free amounts of trade deposits from their dealers, for the period March 1988 to June 1988, should not be included in their assessable value. 3. The party was filing price lists in Form Part I for sale to dealers/customers, and in form Part-II for sale to industrial consumers. 4. The Assistant Collector, Central Excise, Jaipur, vide his Order-in-Original No.V(76)17/101/87/Part III, dated 13-2-1989 observed that the assessee was ordinarily selling its goods through the dealers who have provided interest free deposits. In his view, it was a truism to say that no body in the commerce and industry gives interest free loans unless he expects to be benefited by grant of such loans, directly or indirectly. He thought that the seller has very much benefited by such interest free deposits, and that those deposits were the indirect consideration of sale in the hands of the seller. The assessee was having interest free deposits of Rs. 31,45,000/- as on 31-12-1987. The annual interest on these deposits @ 18% worked out to Rs. 5,66,100/-. The Assistant Collector, Central Excise, Jaipur came to a finding that this amount had to be ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deposits with the assessee which were Rs. 31,45,000 as on 31-12-1987 increased to Rs. 76,30,000/- as on 31-3-1989. The value of clearances under price lists in Part-I were Rs. 13,65,37,136.03 during the financial year 1988-89. Applying the criteria earlier fixed by the Assistant Collector, Central Excise, Jaipur in the Order-in-Original No. 7/89 Valuation, dated 13-2-1989, the interest @ 18% per annum on the deposit came to Rs. 13,73,400/-, and apportioning it on the value of clearances of Rs. 13,67,37,136.03 during the financial year 1988-89, the element of notional interest to be added to assessable value of the goods supplied under the price lists filed in Part-I came out to 1.00588%. 8. It was, thus, observed that the assessee was required to add 1.00588% in the assessable value of the clearances effected from 1-4-1989 onwards whereas they had only added 0.51%. 9. The differential duty of Rs. 69,260.55 was accordingly demanded under Section 11A of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act ). 10. On similar grounds. Show Cause Notices were issued for the period 1-8-89 to 30-9-1989 (No. C.E. - 20/PL/MAL/Part-II/88, dated 28-2-1990 for dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessable values. They had submitted price lists in Part-I. Along with the price lists they had submitted that they were taking interest free deposits/security from some of their customers. They were selling the goods on credit. 17. He added that there was no evidence of depression of sale prices. Sale prices were uniform. Department has taken a view that the buyers who have not made any deposits were favoured buyers and in their case the price could only be considered as concessional. He submitted that the facts and circumstances of the case do not support this view. 18. As regards appeal No. 3284 he submitted that the facts were the same as in appeal No. 2218, but the period was different. The arguments and submissions made by them were common to both the appeals. 19. In support of his arguments, he relied upon the following decisions (1) 1990 (46) E.L.T. 462 (Tribunal); (2) 1992 (57) E.L.T. 211 (Mad.); (3) 1992 (62) E.L.T. 422 (Tribunal); 20. Smt. C.G. Lal, learned SDR submitted that the Tribunal s decision in the case of Lily Foam was not applicable to the facts of this case. She relied upon the following decisions :- (1) 1988 (36) E.L.T. 629 (Tribunal); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame rates was by way of extra concession to such dealers. 28. The party had explained that the security deposit was obtained by way of security against the goods supplied so that in the event of refusal to receive the goods the appellants company s interests are not jeopardised, and that they were interest free and refundable. They have submitted that these deposits had no nexus with the price of the goods sold. 29. In the facts and circumstances of the case, there is no evidence that the interest free security deposits/advance payments made by the dealers have led to a depression in the sale price of the excisable goods. There were dealers who had not made any deposits; still the price charged from them was the same as charged from the dealers who had made the deposits. 30. In the case - Lakshmi Machine Works Ltd. v. Union of India, 1992 (57) E.L.T. 211 (Madras), the Madras High Court have observed that there should be nexus between the additional consideration and the sale price of the excisable goods, and that additional consideration may not influence the sale price in certain cases, and in certain cases it may influence the sale price. 31. They observed in para 9 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were supplied in cylinders. From the consumers who used to have the delivery in the cylinders supplied by the respondents, certain rentals were charged by the respondents. The activity of supply of gas cylinders was ancillary to the supply of gases. 40. The Hon ble Supreme Court observed that any income either in the shape of interest on deposits, notional or real, may be earned on the deposit for the safe return of cylinders or any rental would be though ancillary, but would not be the price for the manufacture. 41. They added that charges like rentals for the cylinders and the notional interest income were for ancillary or allied services and that was not an activity of manufacture. 42. The Hon ble Supreme Court had distinguished the ancillary or incidental activity of manufacture from the ancillary or incidental activity of the supply of the goods. 43. The Honourable Supreme Court held that the interest, notional or real, accruing on deposits for the safe return of cylinders as well as the rentals would not constitute part of the assessable value. 44. No evidence has been brought forth before us that when payments by the customers are delayed any interest is char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne foam to the three dealers from whom the appellants had received advances. 51. In para 19 of their order, the Tribunal observed as under :- It is well settled law that where the goods are sold by an assessee, in the course of wholesale trade at a price where the price is the sole consideration and the buyer and seller are not related persons that such prices would become the normal price for the purposes of Section 4 of the Act. Admittedly, a substantial portion of the polyurethene foam namely about 46% was sold to dealers who have never given any advance to the appellants. There is no price difference between the dealers from whom advances were taken and others. Under these circumstances, we hold that there is no case for invoking the provisions of Rule 5 of the Valuation Rules to include the interest element to the prices for arriving at the assessable value. Even if the 3 dealers happen to be related, which position would be the worst that can be assumed against the appellants, the price charged to others, admittedly, unrelated buyers, would still form the basis for assessment in respect of the sales made to the assumed related persons also, according to settled law. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and further disposal of the goods took place only from those sales depots. Their authorised dealers were given 36.5% discount over the list prices on the purchases made by them, while other buyers (consumers/dealers) were given a varying discount of 25%, or if so instructed by the concerned authorised dealer who procured the orders from such buyers, of more than 25%. The difference between the discount of 36.5% and lesser discount actually granted to a buyer, was passed on by the appellants to the concerned authorised dealers as commission. 59. The appellants took interest free deposit of Rs. 5 lakhs from their authorised dealers, which represented the substantial monetary benefits to the appellants over and above the purchase price for the goods. 60. The Tribunal held that the interest free deposits taken from one or more authorised dealer or dealers constituted additional consideration for the sale of their goods which flowed back to the appellants. 61. As the facts before us are different, the above observations are not relevant for the purpose of disposal of the case before us. 62. In the case - Collector of Central Excise v. Metal Box India Ltd., 1989 (39) E.L.T. 79 (T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants was locked up. Further, it was stipulated in the purchase orders that if there was delay in delivery of the goods, price would be reduced. 69. While remanding the matter to the Assistant Collector, Central Excise to examine whether the advance paid by the purchasers and the bank guarantee executed by the manufacturer had any nexus with the sale price determined under the purchase order, the Tribunal observed that If it has a nexus and reduced the sale price, he may add the interest as additional consideration to the sale price under rule 5 of the rules (Central Excise Valuation Rules, 1975), otherwise assessable value shall be on the basis of the sale price." 70. A careful study of the various decisions discussed above leads to the conclusion that every deposit/advance by the customers may not amount to be an additional consideration as to vitiate the sole consideration , character of the price. In each case the facts and circumstances have to be properly analysed, the nature and the purpose of the deposit/advance have to be gone into, keeping in view the total cost, special features and special nature of the goods transacted for manufacture. It has to be studie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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