9911796707
TMI Blog2006 (5) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... e lists and that evasion of duty had taken place. The period covered by the notice was 1985-86 to 1990-91. 3. The ground for alleging short-levy was that the appellant was taking a deposit of Rs. 500 per motorcycle at the time customers booked motorcycles and this deposit was an additional (to the sale price) consideration and that suitable addition was required to be made to the sale price to arrive at the assessable value. The case was adjudicated in June, 1997 and Commissioner of Central Excise confirmed a duty demand of over Rs. 2 crores. Penalty of Rs. 50 lakhs was also imposed on the appellant manufacturer. That decision was appealed against to the Tribunal as well as the Hon'ble Supreme Court. The matter is now before us upon remand by the Hon'ble Supreme Court vide its order of April, 2005. 4. The direction in the remand order is that the Tribunal will consider in detail after looking into the accounts of the assessee, whether or not advances or part thereof have been used in the working capital and whether or not the advances received or the interest earned thereon had been used in the working capital and whether it had the affect of reducing the price of motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had the effect of depressing the sale prices, no addition is required to be made to the sale price for the purpose of arriving at the assessable value. 9. Learned SDR has submitted that the Hon'ble Supreme Court had directed that no further evidence is required to be allowed in the case and therefore, the evidence relating to sale of motorcycles to parties other than the ones making deposit is not be allowed, since this factual position was not relied upon by the assessee in the adjudication proceeding. The learned SDR has also taken us through the evidence and adjudication to show that the deposits had conferred advantage on the appellant and that the advances and earnings from them were taken into account in all management decisions. 10. The conclusion of the Cost Accountant is that "surplus money from advances appears to have been used in the 'working of the company' but not necessarily entirely in the 'working capital of the company".' His observation about use of the funds and the earning therefrom are as under : 'In the present case the additional source is the deposits for booking of vehicles against which there are also statutory investments. Well recognised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 798.80 14424.58 16304.74 18762.46 21843.14 22779.13 23568.90 Diff. W.R.T. Pr. Year 890.33 865.34 924.06 1625.78 1880.16 2457.73 3080.68 935.99 789.77 %Diff. W.R.T. Pr. Year 8.80 7.86 7.78 12.70 13.03 15.07 16.42 4.29 3.47 COST OF SALES A Material Cost 7480.78 9001.75 9363.88 10296.27 10875.93 11581.09 13923.21 ,16358.40 17132.85 17770.01 Diff. W.R.T Pr. Year 1520.97 362.13 932.39 579.65 705.17 2342.12 2435.19 774.45 637.17 %Diff. W.R.T Pr. Year 20.33 4.02 9.96 5.63 6.48 20.22 17.49 4.73 3.72 B Conversion Cost (including depreciation ) 2241.73 1909.02 2235.92 2767.93 3270.53 3475.95 3757.9'9 4560.04 4605.00 4510.70 Diff. W.R.T Pr. Year ,-332.72 326.91 532.01 502.60 205.42 282.03 802.06 44.95 -94.30 %Diff. W.R.T Pr. Year -14.84 17.12 23.79 18.16 6.28 8.11 21.34 0.99 -2.05 C Financial Cost (Net of Income) 212.39 558.33 141.83 505.90 461.77 125.69 155.40 164.49 184.57 4.23 Diff. W.R.T Pr. Year 345.94 -416.50 364.07 -44.13 -336.08 29.71 9.09 20.07 -180.33 %Diff. W.R.T Pr. Year 162.88 -74.60 256.69 -8.72 -72.78 23.63 5.85 12.20 -97.71 D Total Cost 9934.91 11469.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the order : "From the above, it clearly transpires that M/s. HHML had been receiving huge amounts by way of customers' booking advances which were partly used to meet their working capital requirements and partly invested in deposits/securities. M/s. HHML earned substantial income as a result thereof in the form of interest, dividends and capital gains. The utilisation of customers' booking advances to meet a part of their working capital requirements consequently resulted in lowering their working capital borrowings. As a result of this, the financial charges which form an integral part of the cost of production of goods also got lowered. This improved profitability and savings in interest costs. In other words, the availability of funds as a result of the investments and savings in interest costs, due to utilisation of customers' booking advances in the manner explained above, enabled the party to keep the prices of the motorcycles lower. It is clearly borne out on record that losses sustained by the party have been made good by way of incomes earned on deployment of the booking advances received by them in the manner explained above. Eventhough, the motorcycles are not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of about Rs. 184 in 1985-86 per motorcycle, there was a loss of about Rs. 460 per motorcycle in 1986-87. An upward price revision of over Rs. 1600/- in 1989-90 only helped reduce the loss by Rs. 587 and could not yield a positive margin. From these, it is clear that company did not follow a cost-plus profit approach while pricing the motorcycles. This also confirms the submission of the learned Senior Counsel that the prices were market driven and motorcycle manufacturers could not follow a cost of production plus reasonable profit pricing policy. 15. That brings us to the question as to how the deposits figure in the price equation. The appellant paid interest at 9% to the depositor. The adjudication order notes that the borrowing cost would have been 16%, thus yielding a differential of 7%. Converted into amount, this brings an advantage of Rs. 35 per year upon a deposit of Rs. 500/-. The question is as to whether this Rs. 35 was relevant for the purpose of pricing the product. The table at Annexure II shows a gap varying from plus Rs. 1122/- per motorcycle to minus Rs. 771. Certainly, Rs. 35 would not swing the balance either way. Certainly, this additional gain could not ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
