Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise vs Novapan Industries Ltd. on 21 June, 2000
Equivalent citations: 2000(71)ECC542, 2000ECR641(TRI.-CHENNAI), 2001(137)ELT662(TRI-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. In these five Revenue appeals, the basic issue pertains to availability of deduction of interest on receivables from the assessable value. Appeal Nos. E/991 to E/992/99 are against Order-in-Appeal No.1/89 and 15/99 dated 15.2.99 passed by the Commissioner (Appeals). Appeal Nos. E/998 to E/990 are against Order-in-Appeal No. 14/99 passed by the Commissioner (Appeals). Since the basic issue in all these appeals is common, the same are being considered together.
2. Heard Shri S. Kannan, Ld. DR for the Revenue and Shri A.P. Datar, learned Counsel assisted by Shri Saravanan, learned Counsel for the Respondent.
3. Learned DR submits that the Revenue is aggrieved by the orders impugned on two counts. Firstly these orders are against Board's Circular No.194/28/96 CX dated 29.3.96, the operative portion of which is extracted below:
The matter has been examined in the Board and it is hereby clarified that deduction of interest on receivables cannot be permitted from the assessable value of excisable goods if the interest is not charged over and above the sale price of such goods. The backing for this stand is available in Supreme Court's reasoning for excluding the interest on receivables viz. Such amounts are received subsequent to the sale of excisable goods. If the assessees are claiming that such interest costs are in-built in the price, they cannot be deducted from the wholesale price because by their very nature these costs would then be part of the price known prior to sale.
4. As against this the orders impugned have followed amount of interest on receivables to be deducted from the assessable value even where such interest is not charged being the interest is in-built in the price. The learned DR further reiterates the main grounds of appeal which is extracted below:
The present case differs from Govt. of India v. MRF case. According to this judgment, "the interest charged from the date of delivery of goods till the date of realisation of the price therefore should be deducted from the value of goods". After going through the records, this is not the practice being followed in the present case. In this case, 'there is some interest to be paid by the assessee to the banker which has been certified by the Chartered Accountant as interest on receivables. The Chartered Accountant has worked out a percentage of interest on receivables. This he has then divided with the net turn-over. The figure that emerges out of this is then as a fraction to be deduction from the assessable value for the purpose of assessment. In other words, he has worked out the interest on receivables from all the buyers/dealers and deducted it from the Assessable value irrespective of the fact whether a particular dealer has paid the cost of the goods in time or not.
From the above scheme it is seen that there is a uniform deduction on grounds of interest on receivables taken from the asessable value. Those people who have made payments in normal time also get the benefit of a deduction with which they are not related. This is over and above the prompt payment discount which the company is giving to those people in form of deductions. In other words, any one who pays promptly get two discounts, one is prompt payment discount and the second is discount on account of late payment made by other parties. The MRF original or final judgment does not envisage double discount on account of prompt payment. Therefore, there is depreciation in the assessable value in relation to goods sold to some of the buyers/dealers for which there is no legal provision available.
5. The learned DR intervenes that the said scheme as detailed above distinguishes the practice followed by the respondents from the issue considered by the Hon'ble Apex Court in the recalled judgment delivered by them. Therein the issue of double benefit to the assessee was not at all considered. He submits that the orders impugned have erred in law and need to be set side and the Revenue appeals allowed.
6. Shri Aravind Datar, learned Counsel submits that the cause of action in these appeals basically arose from two show cause notices dated 4-9-96 which proposed duty demand by disallowing abatement claimed by the respondents on the ground that the assessees were not separately charging interest on receivables, but that it was in-built. He takes us through para 4(1) of the show cause notice which is extracted below:
The assessee is not separately charging the interest on receivables but it is in-built into the sale price. The interest on receivables is the interest charged on the credit sales from the date of delivery till the date of realisation.
7. The learned Counsel then draws our attention to the second show cause notice dated 24-1-99 wherein the demand was proposed only on the ground that the initial judgment of the Hon'ble Apex Court in the case of MRF had been recalled by the Hon'ble Apex Court on review petition by the Revenue. At that point the Hon'ble Apex Court was still in consideration of the merits of the said review petition after recalling their earlier judgment and the final judgment had not been passed. Therefore, the show cause notice stated that the earlier decision having been recalled interest on receivables would not be given as abatement.
8. The learned Counsel submits that in the present grounds of appeal the scheme under which the abatement is given across the board's order, same was the grounds which were not agitated in either of the show cause notices and to that extent this ground of appeal is beyond the show cause notice which commenced this dispute. In this connection, he cites the decision of the Supreme Court in the case of Gujarat State Fertilizers v. CCE as in wherein the Hon'ble Supreme Court held that the Tribunal cannot go outside the record and make out an entirely new case. He also cites the decision of the Division Bench of the High Court of Andhra Pradesh in the case of Raphael Pharmaceuticals Pvt. Ltd. v. Supdt. of Distilleries as in wherein the High Court had held that order of adjudication or appellate authorities' order cannot be based on grounds other that those alleged in the show cause-cum-demand notice under Section 11A of the CE Act, 1944. The High Court had observed that the basis on which the appellate authority or the assessing authority gave a finding is not the basis mentioned in the demand notice and on that ground alone, the impugned orders of all the three authorities were quashed. He submits that the Revenue's grounds of appeal extracted above, goes beyond the issue raised in the show cause notice under Section 11A of the CE Act, mentioned above and therefore on this short ground alone, the Revenue appeals are required to be disallowed.
9. With respect to the issue of the charge that interest having not been charged separately, but were in-built in the price of the goods, which was agitated upon by the orders in original concerned, leading to the orders impugned, as well as to the charge that MRF initial judgment had been recalled by the Supreme Court, the learned Counsel submits that final judgment in the case of MRF had been rendered by the Supreme Court. He further submits that this very Tribunal in their Final Order No. 2823/99 dated 4-11-99 in the case of ICI India Ltd. v. CCE had considered this very issue as to whether interest is deductible from the price arrived at the assessable value in case where the interest was not charged separately but was included as inbuilt cost in the price. While doing so, this Tribunal had considered the purport of the final judgment of the Supreme Court. (Pursuant to the recall of the first judgment). He takes us through para 9 of the said final order wherein we had in depth-considered the purport of the judgment of the Supreme Court in the MRF case. After taking into consideration the issue considered by the Supreme Court in its first judgment, which is to be read along with their final judgment issued subsequently, we had found that since the original judgment of the Supreme Court as well as para 66 of the judgment on recall of the judgment by the Supreme Court had considered the situation where the interest had been in-built in the cost. Therefore, final judgment allowed the abatement even in such cases. He submits that the ratio thereof is clearly applicable to the facts of this case and would supersede Board's Circular noted above. He submits that there is no merit in the Revenue appeals and the issue is squarely covered by the Supreme Court in the MRF case.
10. We have carefully considered the submissions and records of the case. We find that in both the show cause notices noted above, the allegation of those buyers who did not pay promptly are benefited by the double discount, the quantum was not at all raised therein. Therefore, ground No. (vi) of the Revenue appeal extracted above is a new ground which were not the subject-matter of the Revenue adjudication as well as consideration at the first appellate level. In terms of the decision of the Supreme Court as well as that of the High Court of Andhra Pradesh noted above, on this issue, we are not in a position to look into this entirely new ground of appeal at this second appellate stage. On this point alone the Revenue appeals are required to be rejected.
11. Since the show cause notices had proposed rejection of the said abatement claimed by the respondents before us, on ground of interest being in-built in the price and not charged separately, we are also considering the law on this aspect here- under.
12. On careful consideration we find that this issue was examined by us in great detail in the final order in the case of ICI Ltd. v. CCE (supra) the relevant findings therein extracted below, we find that since the issue involved in this case is also that interest was in-built in the price and not charged separately, therefore, the facts in this case are clearly within the ambit of our earlier decision.
The facts recorded by the Hon'ble Supreme Court clearly show therefore that interest element was in-built in the price and that this price with the interest element in built was under consideration by the Apex Court. When these facts under consideration by the Hon'ble Apex Court are read with the final judgment in the recalled order as in (para 66), it is clear that it was held by the Hon'ble Supreme Court that such a deduction was admissible under the Act.
9. We find that as against this the Ld. Commissioner (Appeals) has recorded that this element when in-built in the price and claimed as a deduction to be in the nature of an abatement and as therefore concluded that such a claim for abatement was not considered by the Hon'ble Supreme Court in the MRF case (supra). We find that this conclusion is erroneous and has perhaps reached without reading the para 16 of the original judgment of the Supreme Court and para 66 of the judgment on recall of the Supreme Court noted above. We have already held that such an in-built cost on this account of interest on sundry debtors was clearly considered as deductible by the Apex Court in the issue. Therefore, we find that on this aspect alone, the Order-in-Original is not a fully speaking order.
Applying the ratio thereof, we find that even where the interest is in-built in the price, on that ground per se abatement thereof from assessable value cannot be denied. The Board's Circular cited by the learned DR obviously does not survive in view of the decision contrary by the Hon'ble Apex Court in MRF case (supra).
13. In view of these analysis and findings, we are clearly of the considered, on that there is nothing in these Revenue appeals which compel us to interfere with the orders impugned and therefore, the Revenue appeals are rejected.