Customs, Excise and Gold Tribunal - Tamil Nadu
Ici India Ltd. vs Commissioner Of Central Excise on 4 November, 1999
Equivalent citations: 2000(67)ECC547, 2000ECR152(TRI.-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. In this appeal, appellants are required to pre-deposit Rs. 50,86,403.91 as duty short paid for the period 1.4.89 to 31.3.98.
2. Heard Shri Nambi Rajan, Ld. Advocate for appellants and Shri S. Kannan, Ld. DR.
3. Learned Advocate submits that the matter before us concerns the denial of deduction of interest on Sundry Debtors for this period vide Order-in-Appeal No. 65/99 (H-I) CE dated 1.6.99. He further submits that the Ld. Commissioner (Appeals) has allowed their claims for secondary freight charges and appellants do not wish to press their claim for deductions on account of purchase tax before us, which had been denied in the Order-in-Appeal impugned. Therefore, the only matter before us with respect to deduction from the cumulative price of interest on sundry debtors. He submits that the matter under consideration is no longer res integral as it has already been considered by the Hon'ble Apex Court in the case of MRF Ltd v. UOI as in read with Hon'ble Apex Court's judgment in view of recalling this decision as in . Ld. Advocate submits that both in the initial judgment as well as the later recalled judgment, the Hon'ble Apex Court has consistently held that interest on sundry debtors is deductible from the price to arrive at the assessable value. He submits that the Ld. Commissioner (Appeals) has clearly erred in holding that since the interest was not charged separately but was included as an in-built cost in the price, therefore such a deduction would amount to an abatement, and hence this matter would not be covered by the Hon'ble Apex Court's decision in the above-noted case. He submits that the first judgment of the Hon'ble Supreme Court (recalled subsequently) contains mere details about the facts and the issues involved and subsequent recalled judgment contains the final decisions of the Supreme Court on these issues. Therefore to ascertain the facts considered by the Hon'ble Supreme Court, the text of both judgments should be read together as far as the facts are concerned. Therefore, he submits that in para-16 of the Hon'ble Apex Court judgment as in , the Supreme Court had considered the claim of M/s. MRF for deductions of interest on receivables (Sundry Debtors for sales) where the said cost was in-built in the price. He takes us through the said para-16 of the judgment which is extracted below for the sake of convenience:-
16. Another head of deduction disallowed to MRF relates to interest on receivables (Sundry Debtors for sales). MRF has represented that this cost is in-built in the price and is incurred on account of the time factor between the time the goods are delivered and the time the moneys are realised. The cost is incurred only where credit terms are given in case of up-country and other buyers where payment is made much after the sales are effected. They contend that it is nothing but an extension of the principle underlying Rule 4 of the Central Excise (Valuation) Rules. They contend that this is an adjustment in value required to be made to take into account and provide for the difference in the time of delivery and the realisation of the sale value. As stated in our judgment in Union of India and Ors. v. Bombay Tyres International Ltd. (supra), it is only those expenses incurred on account of factors which have contributed to its value upto the date of sale or the date of delivery which are liable to be included in the assessable value. The interest cost and expenses on sundry debtors or interest on receivables is an expense subsequent to the date of sale and removal or delivery of goods in our opinion MRF Ltd. would be eligible to claim deduction on this account.
4. He submits that after this decision was recalled and the Hon'ble Apex Court had reconsidered the matter, they continued to hold that as far as interest on receivables was concerned, the same should be deducted from the value of the goods and allowed the claim of these deductions. This is evident from para-66 of the recalled judgment as in . For the sake of convenience, it is extracted below:-
66. The case of the assessee (Madras Ruber Factory) is that where the goods are sold to up-country wholesale buyers and payments are received quite some time later, it is indeed a case of sale on credit and, therefore, the interest charged from the date of delivery of goods till the date of realisation of the price thereof should be deducted from the value of the goods. The interest charged, it is submitted, is only in lieu of the time taken in making the payment by the up-country wholesale buyer. Since this is the amount received subsequent to the sale from the depots and does not fall within the ambit of any of the expenses held includible in Bombay Tyre International, it is clearly excludible. The claim for this deduction is, therefore, allowed.
5. Learned Advocate submits when the facts as available in para-16 of the first judgment is read with the findings and decision of the Apex Court in para-66 of the recalled judgment, it is crystal clear that the Hon'ble Supreme Court had considered a situation where the cost pertaining to interest on such sundry debtors had been inbuilt in the price of the goods. Therefore, the Ld. Commissioner (Appeals) has erred in coming to a conclusion that such inbuilt cost amounted to claiming an abatement, which issue was not considered in the MRF judgment. On the contrary, the Ld. Advocate submits, this very issue was considered by the Hon'ble Apex Court in MRF case (supra). Therefore, the Order-in-Appeal clearly suffers from non-application of mind insofar as this issue is concerned.
6. Ld. Advocate further submits that as far as their claim for deduction of purchase tax from the value is concerned, appellants do not press this before us. Since no other matter apart from the interest on sundry debtors is now before us, therefore Ld. Advocate prays that the best course would that matter to be remanded to the original authority for recomputation of the actual amount of duty payable, if any, after adjusting the amounts payable against the amounts not payable but already paid. He submits that such an adjustment is provided for in law in view of the Tribunal decision in the case of Tata Oil Mills Co. Ltd. v. CCE as in as well as in other judgment of the Hon'ble Supreme Court (unreported) in Civil Appeal No. 2643-2650/1979 dated 19.7.95 in the case of UOI and others v. lndo National Limited and Others. Ld. Advocate submits that one of the respondents in these civil appeals was the present appellants itself though in the style and name of Alkali and Chemical Corporation of India, therein the Hon'ble Supreme Court had held as follows:-
It, therefore, seems appropriate that the entire matter is remitted to the Assistant Collector of Central Excise who initially dealt with these matters for afresh determination of the entire question of liability of excise duty after taking into consideration the deductions, if any, to which each assessees would be entitled. To put it differently the matter will go back to the concerned Assistant Collector who will determine the liability in regard to excise duty after taking into consideration the deductions to which each assessee would be entitled in the light of the decision of this Court dated 8.5.1995. If at the end of the exercise it is found that the assessee is entitled to a refund the question whether the amount is refundable in view of Section 11B of the Central Excise and Salt Act would have to be determined by the said authority.
7. Ld. DR reiterates the Order-in-Original but has no objection to the recomputation of the duties involved at the original level as the same cannot be done by the department. He submits that as held in the Order-in-Appeal impugned, the Ld. Commissioner (Appeals) has clearly held therein that later payments of the prices of the goods by the buyer by itself does not depress the value of the goods and therefore no abatement equivalent to interest involved therein should be allowed to be deducted. Therefore, he reiterates the findings of Ld. Commissioner (Appeals) that this situation is distinguished from the facts considered by the Hon'ble Supreme Court in the case of MRF (supra).
8. We have carefully considered the rival submissions and records of the case. We find that since the appellants do not wish to pursue their claim for deduction of purchase tax before us, therefore, the only issue before us pertains to availability or otherwise of the interest on sundry debtors as a deduction from the price of the goods to arrive at the assessable value. In this connection, a plain reading of para-16 of the Hon'ble Supreme Court decision in the case of MRF as in shows that the facts before the Hon'ble Supreme Court were that MRF had represented that interest on receivables i.e. Sundry debtors for sales was a cost in-built in the price and was incurred on account of the time factor between the time the goods are delivered and the time these moneys are realised. 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 , it is clear that it was held by the Hon'ble Apex 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 inbuilt 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-Appeal is not a fully speaking order.
10. Since the appellants in the stay application have said that if the duty net payable is recomputed after taking into consideration the effect of the Order-in-Appeal impugned, and if their claim for deduction of interest on receivables discussed above is also taken into consideration as admissible, then they would be entitled to a refund and therefore they had claimed that no pre-deposit should be insisted upon at this stage. We see great force in this argument and therefore we have taken-up this appeal by waiving the duty deposit and allowing the stay of recovery thereof.
11. In view of the aforesaid analysis, we modify the order-in-appeal impugned to the extent that the decision contained therein on interest receivables (sundry debtors) is set aside and the matter is remanded to the original authority for the following purposes:-
(a) To reconsider the appellants claim for deduction of interest on receivables (sundry debtors) in the light of the Hon'ble Supreme Court decision as contained in para-66 of the first order read with para-16 of the second order which has already been discussed by us above.
(b) Thereafter to recompute the net duty payable in terms of decision arrived at on the question at sub-para (a) above as also reliefs given to the appellants on the other issues in the Order-in-Appeal impugned which we have not set aside and therefore which continue to remain in force.
12. It is hereby clarified that while arriving at this computation, the original authority shall take into consideration all submissions on facts of payment of duties earlier which may be made considered before him and which he may consider to be relevant to the issue. Order accordingly.