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Judgment
M/s. A Infrastructure Ltd. (formerly known as Shree Pipers Ltd.) Hamirgarh, Bhilwara, the appellant, has assailed the order dated 06.03.2018 passed by the Commissioner (Appeals), by which the order dated 31.12.2014 passed by the Assistant Commissioner of Central Excise, the Assistant Commissioner has been upheld and the appeal has been dismissed. The Assistant Commissioner disallowed deduction on "interest on receivables" and "collection charges" claimed @9.5% by the appellant from the assessable value of the goods during the period from 01.08.1990 to 31.12.1997. Accordingly, the demand of Rs. 1,79,63,423/-, being levy of Central Excise duty, was confirmed with interest under section 11AA of the Central Excise Act, 1944, the Excise Act.
The appellant is engaged in the manufacture of asbestos cement pipes which are supplied mainly to Government Departments against rate contracts for carriage of drinking water and sewage. The appellant filed price lists under rule 173 C of the Central Excise Rules, 1944 for determination of the assessable value of the product and thereafter the price declaration under section 4(1)(a) of the Excise Act. The appellant had, as there were delays in making payment by the State Government Departments, claimed deductions on account of interest on receivables and collection charges @9.5%, based on the interest cost incurred for the average period of delay in making the payments in the preceding year. In support of this claim, certificates from a Charted Accountant were submitted. The certificates reflected that the interest costs incurred was in the range of 9.5% to 11.5%. By an order dated 30.07.1990, all the 22 price lists were approved on a provisional basis, allowing the deductions that were claimed.
Sixteen show cause notices were issued to the appellant proposing disallowance of the deductions claimed for the period 01.08.1990 to 28.02.1997 and the demands proposed in these notices were confirmed by a common order dated 08.08.1997. Thereafter, two more show cause notices for the period 01.03.1997 to 31.12.1997 were issued and the demands were confirmed by orders dated 13.02.1998 and 18.03.1998 passed by the Assistant Commissioner. These three orders were subjected to appeals at various levels from time to time and ultimately have culminated in the order dated 06.03.2018 passed by the Commissioner (Appeals), which order has been assailed in this appeal.
Sixteen Notices for the period 01.08.1990 to 28.02.1997
It was alleged in the sixteen show cause notices that since the contracts provided for payment on delivery or within 15 to 30 days of the dispatch of the material, no deduction was admissible. A demand of duty, interest and penalty was, accordingly, made. The basis for issuing the notice is:
"If the assessee is unable/fails to recover the proceeds of the sold goods from their buyers within the time period specified under the valid contract order then reduction of assessable value @9.5% as interest on receivable & collection charges is contrary to the provisions of Central Excise & Salt Act, 1944. Moreover, in those supply orders/ contracts in which the terms & conditions of payment has not been specified, the assessee is supposed to receive 100% payment immediately on delivery of the goods. Hence the assessee will not have to bear the interest on receivable & collection charges. Moreover, deduction on this account is not permissible under Section 4 of the Central Excise & Salt Act, 1944."
In reply to the notice, the appellant pointed out that clauses in the contracts regarding payment against delivery were rarely honoured by the Government Departments and the payments were invariably delayed by several months and, therefore, the interest cost was liable to be deducted. All the sixteen show cause notices were adjudicated by a common order dated 08.08.1997. The Assistant Commissioner held that no deduction was admissible from the price for arriving at the assessable value and the appropriate remedy for the appellant was to file a suit against the customers for delayed payment. It was also observed that from a perusal of the certificates furnished, the interest cost was around 13.68%, but there was no material to show that it was inbuilt in the price of the goods and that the Government Departments had recognized this aspect while issuing the rate contracts. The Assistant Commissioner also held that deductions claimed for collection charges were not admissible. The demand of duty for Rs.1,54,55,619.70/- was, therefore, confirmed under section 11AA of the Excise Act with interest.
The appellant filed an appeal before the Commissioner of Central Excise (Appeals) to assail the aforesaid order dated 08.08.1997. The Commissioner (Appeals) decided the appeal by an order dated 04.02.1998. The Commissioner (Appeals) upheld the order disallowing interest on receivables but set aside the order of the Assistant Commissioner so far as it related to collection charges. The relevant portion of the order is reproduced below:
"The question involved in this case is one of principle only. The issue under consideration is whether in a case like the present one where the contract or invoice does not show any separate liability for interest but such interest is built in the prices as claimed by the appellants, is it legally permissible to allow deduction on account of such interest. During the personal hearing the Ld. Advocate relied uplon the following case laws in support of their contention that interest on receivables and collection charges would not form the part of the assessable value.
The aforesaid judgment permit deduction on account of interest on receivables. This judgment however, covers cases only where interest is charged separately and not where it forms part of the prices. In the above case it has been clearly mentioned that thus amount is received subsequent to the sale from the depots. This is however not so in the present case. In these circumstances I agree with the order of the Ld. Assistant Commissioner.
As regards deduction on account of collection charges the appellant submitted that these charges are paid to their collection agents and bankers for collection of sales bills. In fact the appellants did give a figure of Rs.6,23,968/- for one year (1993-94) towards "Collection Charges" through their Bankers/Collection Agents. Since these charges are quantified separately, disallowing deduction of this amount is not correct."
(emphasis supplied)
Against the order dated 04.02.1998 passed by the Commissioner (Appeals), the appellant filed Excise Appeal No. 1077 of 1998 before the Tribunal and the Department filed Cross Appeal No. 1278 of 1999.
Two Notices for the period 01.03.1997 to 31.12.1997
Two more show cause notices dated 17.09.1997 and 21.01.1998 were issued to the appellant proposing to disallow similar deductions claimed for the period 01.03.1997 till 31.12.1997. The disallowances were confirmed by orders dated 13.02.1998 and 18.03.1998. Two appeals were filed before the Commissioner (Appeals), but they were rejected by a common order dated 29.09.1999.
The appellant filed Excise Appeal Number 14-15 of 2000 before the Tribunal against the order dated 29.09.1999 passed by the Commissioner (Appeals).
Sixteen plus Two Show Cause Notices
The aforesaid appeals, namely Excise Appeal No. 1077 of 1998, Cross Appeal No. 1278 of 1999 and Excise Appeal No. 14-15 of 2000 were decided by a Larger Bench of the Tribunal by a common order dated 06.06.2000. The Tribunal allowed the deduction of interest only to the extent mentioned in the invoices and remanded the matter for quantifying the deduction.
This decision dated 06.06.2000 of the Tribunal was assailed by the appellant before the Supreme Court. The Supreme Court, in its judgment dated 05.05.2004 rendered in Civil Appeal No's 5756-59 of 2000, A Infrastructure Ltd. vs. Commissioner of Central Excise, Jodhpur, held that credit sales include cases where interest is inbuilt in the price. The Supreme Court also observed that the Tribunal should not have limited the investigation after remand to only cases where the period was stated in the invoices but should have let the entire matter to be investigated. The relevant portion of the judgment of the Supreme Court is reproduced below:
"The question whether the interest that is payable on the sale price that is not yet paid by the customer is built into the price structure or not and, therefore, should be deducted from the value of the goods needs to be examined.
In cases where buyers do not make payments immediately against delivery of the goods but payments are received subsequently it would indeed be a case of sale of credit and, therefore, interest is chargeable from the date of delivery of goods till the realization of price thereof and should be deducted from the value of the goods. The question whether in a given case the price structure itself includes the interest charged or not is a matter for establishment on evidence. The fact that a particular period for payment is mentioned would indicate that the payment is not to be made immediately but at a subsequent date and that is credit sale and interest could be charged and deducted out of the sale price. But that circumstance, by itself, is not a decisive factor. Therefore, the Tribunal while remanding the matter should not have limited the investigation of the matter only to cases where the period has been subsequently stated in the invoice. Therefore, we are of the view that the Tribunal ought not to have confined the investigation by the concerned authority after remand to only that aspect of the matter and should have let the entire matter investigated as indicated by us."
(emphasis supplied)
At this stage it would be pertinent to refer to another set of seven show cause notices that were issued to the appellant for the subsequent period from January 1998 to June 2000, before proceeding further with the facts relating to these eighteen show cause notices.
Seven Notices for the period January 1998 to June 2000
It needs to be noted that for the subsequent period from January
1998 to June 2000, seven show cause notices were also issued to the appellant disallowing deductions claimed on "interest on receivables" and "collection charges" and by an order dated 28.09.2001, the proposed demand of Rs. 64,20,981/- was confirmed. The appellant filed an appeal before the Commissioner (Appeals) to assail the aforesaid order dated 28.09.2001. The Commissioner (Appeals), by order dated 18.02.2005, held that deduction should be allowed only on invoice to invoice basis by calculating the interest actually incurred for each clearance but not exceeding the claim of 9.5%. The matter was, therefore, remanded for computation.
The appellant filed Excise Appeal No. 1681 of 2005 before the Tribunal against the order dated 18.02.2005 passed by the Commissioner (Appeals).
However, pursuant to the order dated 18.02.2005 passed by the Commissioner (Appeals) remanding the matter for computation, the Deputy Commissioner took up the seven show cause notices for fresh adjudication and by an order dated 26.04.2006, allowed partial deduction on the basis of the verification done by the Range Officer of the data supplied by the appellant pursuant to the letter issued by the Deputy Commissioner. The relevant portion of the order passed by the Deputy Commissioner is reproduced below:
"The datas relating to interest on receivables has been supplied by the assessee on invoice to invoice basis which has been got verified from the Range Officer. The interest on the amount has been calculated for the time lapse between raising of commercial invoices and the realization of monies.
*******
Therefore, an invoice-wise chart showing the total collection charges and interest on receivables actually incurred and amount of total deduction claimed @ 9.5% by the assessee pertaining to each invoice has been prepared. From the chart so prepared it is revealed that:
i) In some cases, the total expenditure actually incurred on both the accounts is less than the deductions claimed @9.5% by the assessee at the time of clearances of the goods and after allowing the deductions of actual expenses from the assessable value. I find that Central Excise duty to the tune of Rs 14,26,413/- has been short paid by the assessee
ii) In some cases, the total expenses actually incurred on both the accounts is more than the deductions claimed @9.5% by the assessee and in such cases deductions are to be allowed to the extent of 9.5% as claimed by the assessee and no duty is demandable from the assesses
Further I observe that the assessee has short paid the duty of Rs 14.26.413/- during the period from 1.1.98 to 30.5.2000 which is recoverable from them under section 11A of the Central Excise Act, 1944.
It is well known that Government Department often delay in making payments. In the present case I find that except in a few stray cases there is a delay in making payment ranging from 3 months to a year in all cases in respect of supplies made to the Government Department. In these circumstances I find a considerable force in the submission of the assessee that they have interest components in built in to the price. Every manufacturer operates with a view to make profit and is not seeking to do charity. The assessee is bidding their prices only after taking the estimated interest cost in to account. This is also true for Bank & Collection charges. This estimation is done on the basis of past experiences of the assessee and the reputation of the concerned Govt. Deptts. Further, the Apex Court & the Commissioner (Appeals-ll) CCE Jaipur have also allowed the deductions on both the accounts but on actual & invoice to invoice basis. This shows that the assessee has not deliberately contravened the provisions of Central Excise Law. Therefore, I observe that the issue involved in the case is in respect of interpretation, hence, no penal action is warranted against the assesses.
Therefore, I pass the following order -
ORDER
I confirm the demand for an amount of Rs. 14,26,413/- (Rupees Fourteen lacs Twenty six thousand four hundred thirteen only) and order recovery of the same under Section 11 A(2) of the Central Excise Act, 1944.
I further order recovery of interest in accordance with the provisions of Section 11AA of Central Excise Act, 1944.
(emphasis supplied)
This order dated 26.04.2006 was assailed by the appellant before the Commissioner (Appeals), who by order dated 26.09.2006 dismissed the appeal. Against this order dated 26.09.2006, the appellant filed Excise Appeal No. 3906 of 2006 before the Tribunal.
Both the aforesaid appeals, namely Excise Appeal No. 1681 of 2005 and Excise Appeal No. 3906 of 2006 were decided by the Tribunal by an order dated 11.05.2011. It needs to be remembered that the Deputy Commissioner in the order dated 26.04.2006 had recorded a categorical finding that the interest component was inbuilt in the price of the product. However, the Deputy Commissioner also held that no deduction would be admissible where the total amount towards recoverable and collection charges in the invoices was less than 9.5% and in cases it was more than 9.5% then it would be allowed to the extent of 9.5% only. It is for this reason that in the two appeals before the Tribunal, the contention of the appellant was that deduction on interest has to be given based on the delay in payment for each invoice without any fixed average percentage (i.e. 9.5%) and this contention was accepted by the Tribunal and the appeals were allowed. The Tribunal observed that since there was no dispute regarding the admissibility of interest on receivables from the assessable value, deduction of actual interest receivables for each invoice has to be allowed. Thus, the Tribunal set aside the demand of duty, interest and penalty and allowed the entire deductions claimed by the appellant. It has been stated on behalf of the appellant that the aforesaid order of the Tribunal has attained finality.
Sixteen plus two show cause notices again
Reverting now to the eighteen show cause notices earlier issued to the appellant, it transpires from the record that further action was not taken by the Department pursuant to the judgment of the Supreme Court on 05.05.2004 for a long period of six years and it was in June 2010 that the appellant was called upon to produce records to establish that interest was incurred and was inbuilt in the price of the goods for the period August 1990 to December 1992 in connection with the sixteen plus two show cause notices. The appellant submitted calculations as well as documentary evidence and the Superintendent also visited the appellant's factory and conducted a verification of all the documents available, including the invoices. Based on the verification, the Superintendent concluded that the appellant had paid excees duty of Rs. 41,70,673/- and the duty short paid was Rs. 43,18,548/-. Hence, there was a short payment of Rs. 1,47,874/-. This Verification Report dated 17.06.2010 is reproduced below :
"To,
The Deputy Commissioner Central Excise Division Bhilwara.
Sub- Central Excise Demand case against M/s A Infrastructure Ltd. Bhilwara on the issue of deduction of 9.5% from the assessable value on account of interest on receivables and collection charges - reg.
Sir,
Please refer to your letter C.No.V(55)4/81/96/3575 dated 23.4.2010 regarding above subject, the detailed verification report is being submitted as under-
As per the Supreme Court's Order dated 5.5.2004 in Civil appeal No. 5756-5759/2000, it was held that the interest on receivables and collection charges are to be allowed to the assessee, and on the directions of the Supreme Court the department has already decided the matter partially for the period from 1.1.1998 to 31.5.2000 vide OIO No. 01/06-07(Demand) dated 26.4.2006 issued by the Deputy Commissioner, and the same has been up held by the Commissioner Appeal vide OIA No. 549(HKS)CE/JPR-11/2006 dated 26.9.2006, in above OIO No. 01/06-07(Demand) dated 26.4.2006 issued by the Deputy Commissioner. The interest on receivables and collection charges are allowed on the actual basis but to the extent of deduction claimed by the assessee i.e. 9.5%, the practice, followed in the earlier order, the same has been adopted for verification of remaining period i.e. from 1-8-1990 to 31-12-1997, it is found that the interest that the interest for the time lapsed between raising of invoice and actual realization of monies and collection charges are less then 9.5%, demand of short payment of duty is to be confirmed, and in some cases where actual interest and collection charges are more then 9.5%. but the assessee has claimed only 9.5%, thus it may be allowed to this extent, this verification has been done from invoice wise details as provided by the assessee.
The summary of the verification is as under-
S.No.
Period
9.5% deduction as claimed by the assessee
Actual interest and collection charges incurred
Duty Excess paid
Duty short paid
1.
August 1990 to Dec 1990
1772308.32
1828902.03
-39865.26
28098.26
2.
Jan 1991 to May 1991
5353341.28
7467735.03
-601831.61
162205.18
3.
Jan 1991 to Oct 1991
2780084.84
4306721.16
-370152.74
51582.97
4.
Nov 1991 to April 1992
835632.37
707736.46
-34863.90
62597.66
5.
May 1992 to Sept 1992
1053763.22
1994064.24
-221061.21
11091.08
6.
Oct 1992 to Feb 1993
325603.34
817555.45
-111858.41
2006 03
7.
April 1993 to July 1993
80050.57
72496.26
-5175.26
6918.57
8.
August 1993 to Dec 1993
539865.3
691653.53
-47770.18
10006.61
9.
Jan 1994 to Mar 1994
4396044.91
3418006.89
-2895.91
228596.99
10.
April 1991 to Mar 1994
1495322.49
1636349.09
-30417.50
0.00
11.
April 1994 to Mar 1995
19033537
17722856
-918923.00
1217655.00
12.
April 1995 to Mar 1996
18158449
15272616
-523926.00
1108720.00
13.
April 1996 to Mar 1997
23134507
21612562
-887564.00
1167519.00
14.
April 1997 to Dec 1997
14430311
14341899
-374369.00
261552.00
Total
93388820.64
91891153.14
-4170673.98
4318548.36
As per the above calculation chart, where the actual charges are less than 9.5% as they claimed, it is deemed that the assessee have short paid the duty which come to Rs. 43,18,548/- and the same is to be deposited by the assessee and in some cases where actual charges are more than 9.5% as they claimed the charges to the extent of 9.5% may be allowed, and if the assessee felt that they have excess paid the duty on excess charges they may file refund claim separately."
(emphasis supplied)
The Assistant Commissioner, thereafter disallowed the deductions and confirmed the demand of Rs. 1,79,63,423/- by order dated 31.12.2014. The operative part of the order is reproduced below:
"I find that in respect of deduction of interest on receivables, the Hon'ble Apex Court has observed that the question whether in a given case the price structure itself includes the interest charged or not is a matter for establishment on evidence. The fact that a particular period for payment is mentioned would indicate that the payment is not to be made immediately but at a subsequent date and that is credit sale and interest could be charged and deducted out of the sale price. But that circumstance, by itself, is not a decisive factor. Regarding deduction of Bank charges, the Hon'ble Apex Court further observed that if the invoice price is the basis for valuation, bank commission or interest charges payable to the bank in the account of the customer are definitely in the nature of post-manufacturing and post-clearing expenses and should be deductible from the assessable value. Thus, by following the above observations of Hon'ble Apex Court, I find that the assessee is entitled to get deduction on account of interest on receivables only on the basis of documentary evidences to substantiate that there was credit sale and the price structure was inclusive of interest on receivable accrued on account of such credit sale. Thus, I also find that in case, deduction on account of interest on receivables cannot be allowed on the basis of circumstances itself i.e. delay in payment by the customer and in the absence of documentary evidences, it cannot be construed that the prices are inbuilt of interest & bank charges.
In this regard, I also find that during personal hearing held on 01.9.2014, the learned advocate appearing on behalf of the assessee submitted that "As per contracts payment were to be made on delivery basis and the interest is only on account of delay not as per the payment schedule. Documentary evidences to this effect would be submitted by 03.9.2014". Thus, I find that the assessee have accepted that as per the contract the payment were required to be made at the time of delivery of goods, as such, there was no credit sales; therefore, delay in payment by the customer or the payment is not as per payment schedule cannot be basis by itself for arriving at conclusion that the price charged by the assessee was inclusive of interest on receivables unless it is otherwise proved. On the other hand, it proves that there was no interest on receivable or bank charge amount inbuilt in the price structure in the instant case as the payment were required to be made on delivery basis.
Further, I also find that the assessee has not submitted any documentary evidence to substantiate their version that interest on account of delay in payment was included/inbuilt in the price charged for these goods at the time of clearance. Regarding deduction on account of bank charges, I find that the assessee has not submitted any evidence that they had paid bank commission or interest charges due to delay receipt of payment from the customer to the Bank. Therefore, I find that the assessee is not eligible for deduction on account of interest on receivable and bank charges in the instant cases. I also find that case laws and rules/ regulation referred by the assessee in their written submission dated 03.9.2014 does not support their case.
Thus, I find that in the absence of documentary evidences, the assessee is not eligible for any deduction on account of interest on receivable and bank charges. I also find that Central Excise duty of Rs. 1,79,63,423/- is liable to be recovered from the assessee under Section 11A of Central Excise Act, 1944, so raised under the aforementioned 18 show cause notices issued to them during the period from 01.8.1990 to 31.12.1997. Further, I also find that the assessee is liable to pay interest at appropriate rate applicable during the material period under Section 11AA of the Central Excise Act, 1944."
(emphasis supplied)
An appeal was filed by the appellant before the Commissioner (Appeals) against the aforesaid order dated 31.12.2014 passed by the Assistant Commissioner. This appeal was dismissed by the Commissioner (Appeals) by order dated 06.03.2018 and the order passed by the Assistant Commissioner was upheld. The relevant portion of the order passed by the Commissioner (Appeals) is reproduced below:
"6. I have carefully gone through the case records, submissions made by the appellant in their appeal memo and also at the time of personal hearing. The issue for decision in this appeal is whether the appellant are entitled for deduction 9.5% claimed by them on interest on receivables & Bank Collection Charges.
*******
8 I find that as per the directions of the Hon'ble Supreme Court the adjudicating authority was directed to examine the question whether in a given case the price structure itself includes the interest charged or not is a matter for establishment on evidence. Thus, I find that the impugned order has been issued as per direction of the Hon'ble Supreme Court.
I further find from the decision of the Hon'ble Supreme Court that the Hon'ble Court held in Para 8,9 & 10 the of order dated 05.05.2014 the appellant is entitled to get deduction on account of interest on receivable only on the basis of documentary evidences to substantiate that there was credit sale and the price structure was inclusive of interest on receivable accured on account of such credit sale and also on bank charges included in the price on account of clearance of outstation cheques.
I find from the impugned order that the appellant had not submitted documentary evidences for examination to the adjudicating authority, so as to enable him to examine both the issues in the light of the Hon'ble Supreme Court Order and allow the deductions accordingly.
Thus, I agree with the views of the adjudicating authority that in the absence of documentary evidences deductions cannot be allowed to the appellant, as such, I do not find any infirmity in the impugned order passed by the adjudicating authority.
In view of above, I reject the appeal filed by the appellant and uphold the impugned order passed by the adjudicating authority."
(emphasis supplied)
This appeal has, accordingly, been filed to assail the order dated 06.03.2018 passed by the Commissioner (Appeals).
Ms. Reena Khair learned counsel appearing for the appellant made the following submissions:
i. The appellant had furnished voluminous evidence in support of the "interest on receivables" and "collection charges" borne by the appellant. The certificates of the Chartered Accountant, as well as the Profit and Loss Statement were submitted at the time of the filing of the price list itself. These documents were examined at various stages, including by the Commissioner (Appeals) in 1998, wherein he concluded that the issue was only of principle and the facts were undisputed. A verification of the information submitted was also carried out at the plant by the Superintendent, wherein the actual figures were verified with reference to the original documents. The Commissioner (Appeals) totally ignored all the evidence given by the appellant in this regard;
ii. For the subsequent period based on the very same type of evidence, the deduction was allowed by the Tribunal in the order dated 11.05.2011. The impugned order has been passed in gross disregard of the binding decision of the Tribunal in the appellant's own case. The order of the Tribunal has attained finality and the Department cannot take a contrary stand for the earlier period. In support of this contention, reliance has been placed on the following decisions:
a. Commissioner of C.Ex., Hyderabad vs. Novapan Industries Ltd., 2007 (209) E.L.T. 161 (S.C.)
b. Castrol India Ltd. vs. Commissioner of Central Excise, Chennai, 2015 (326) E.L.T. 420 (S.C.)
c. Commissioner of C.Ex., Vadodara vs. Gujarat State Fertilizers & Chem. Ltd., 2008 (229) E.L.T. 9 (S.C.)
iii. The deductions claimed are admissible and the demand of duty along with interest is liable to be set aside.
Shri Rakesh Agarwal learned Authorized Representative appearing for the Department made the following submissions:
i. Since the issue on merit about allowing deduction of "interest on receivables" and "collection charges" is not under dispute and the quantum of deduction is only in dispute, the Tribunal may remand the matter for arriving at the duty considering (i) whether the price of goods is inclusive/inbuilt of interest and collection charges @ 9.5% as claimed by the appellant; (ii) to arrive at the amount of deduction after considering the interest actually paid from the date of clearance of goods till the receipt of payment from the price based on the decision at point (i);and
ii. However, if the Tribunal decides to allow the appeal, the demand of short payment of duty amounting to Rs. 43,18,548/- may be upheld, being on account of the "interest on receivables" less than 9.5%, as was arrived at in the report of Superintendent dated 17.06.2010.
The submissions advanced by the learned Counsel for the appellant and the learned Authorized Representative of the Department have been considered.
The issue that arises for consideration in this appeal is whether the appellant is entitled to deduction on "interest on receivables" and "collection charges" on the delay in payment for each invoice from the assessable value of the goods for the period from August 1990 to December 1997. According to the appellant, such deductions were claimed as there were delays in making payment of the goods supplied to the Government Departments. The Revenue, however, proposed to disallow the deductions for which two sets of show cause notices (sixteen plus two) were issued. After the decision by a Larger Bench of the Tribunal on 06.06.2000 allowing deduction of interest only to the extent mentioned in the invoices, the matter was taken up by the appellant before the Supreme Court. The Supreme Court noticed that the issue as to whether interest on the price for the period during which the payment was deferred has to be deducted or not from the value of the goods on the date of removal had earlier come up for consideration before the Supreme Court in Asst. Collector of Central Excise & Ors. vs. Madras Rubber Factor Ltd., 1986 Supp. SCC. 751 and the decision on the review that is reported in Government of India & Ors. vs. Madras Rubber Factory Ltd. & Ors., 1995 (4) SCC 349 The Supreme Court noted the earlier observations made by the Supreme Court in the review petition and the same are reproduced below:
"The case of the assessee (Madras Rubber Factory) is that where the goods are sold to upcountry wholesale buyers and payments are received quite sometime 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 realization 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 upcountry 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 includable in Bombay Tyre International, it is clearly excludable. The claim for this deduction is, therefore, allowed"
(emphasis supplied)
The Supreme Court thereafter observed that where buyers do not make payments immediately but such payments are received subsequently, it would be a case of sale on credit and, therefore, interest would be chargeable from the date of delivery of goods till realization of price and should be deducted from the value of the goods. However, the question as to whether the price structure itself includes the interest charge or not is a matter which needs to be established by evidence. The Supreme Court, therefore, remanded the matter to the authority to examine the question whether "interest on receivables" arising on account of time lapse between the delivery of goods and the realization of monies is deductible from the assessable value of the goods at the time of removal from the factory. It also needs to be stated that after detailed discussion, the Supreme Court observed that the bank charges included in the price on account of clearance of outstation cheques cannot form part of the price of the goods at the time of removal and, therefore, have to be excluded from the price while calculating the assessable value of the goods. The observations made by the Supreme Court in regard to "interest on receivables" and 'bank charges' are again reproduced below:
"In cases where buyers do not make payments immediately against delivery of the goods but payments are received subsequently it would indeed be a case of sale of credit and, therefore, interest is chargeable from the date of delivery of goods till the realization of price thereof and should be deducted from the value of the goods. The question whether in a given case the price structure itself includes the interest charged or not is a matter for establishment on evidence. The fact that a particular period for payment is mentioned would indicate that the payment is not to be made immediately but at a subsequent date and that is credit sale and interest could be charged and deducted out of the sale price. But that circumstance, by itself, is not a decisive factor. Therefore, the Tribunal while remanding the matter should not have limited the investigation of the matter only to cases where the period has been subsequently stated in the invoice. Therefore, we are of the view that the Tribunal ought not to have confined the investigation by the concerned authority after remand to only that aspect of the matter and should have let the entire matter investigated as indicated by us.
*******
These three cases were adverted to by a Bench of three judges to hold that the interest on receivables arises on account of time lapse between the delivery of goods and the realisation of monies is deductible from the assessable value of the goods at the time of removal from the factory of the assessee. For the same reason, bank charges included in the price on account of clearance of outstation cheques cannot form part of the price of the goods at the time of removal and as such excludable from the price while calculating the assessable value of the goods.
*******
we have no hesitation in modifying the order of the Tribunal to direct the authorities to whom the matters have been remanded to examine the question whether interest on receivables arises on account of time lapse between the delivery of goods and the realisation of monies is deductible from the assessable value of the goods at the time of removal from the factory of the assessee and also excludes the bank charges included in the price on account of clearance of outstation cheques."
(emphasis supplied)
The records indicates that pursuant to the aforesaid direction issued by the Supreme Court on 05.05.2004, the Deputy Commissioner called upon the appellant to produce records to establish that interest was incurred and was inbuilt in the price. The appellant did submit calculations and evidence and the Superintendent also visited the site to conduct a verification of all the documents, including the invoices. The Superintendent, thereafter submitted a detail verification report dated 17.06.2010 and, in view of the orders dated 26.04.2006 and 26.09.2006 passed by the Deputy Commissioner and Commissioner (Appeals) respectively while adjudicating the seven show cause notices that had been issued to the appellant for the subsequent period from January 1998 to June 2000, observed that "interest on receivables" and "collection charges" can be allowed on actual basis but only to the extent deductions were claimed by the assessee @ 9.5%. The Superintendent concluded that where the actual interest charges are less than 9.5% as claimed by the appellant on an average basis, it should be deemed that the assessee had short paid the duty which comes to Rs. 43,18,548/- and the same is required to be deposited by the appellant. However, in cases where the actual interest charges are more than 9.5%, then since the appellant had claimed @ 9.5% only, this much only should be allowed and if any excess amount has been paid, the appellant can file a refund claim separately.
This report submitted by the Superintendent has been reproduced in paragraph 18 of this order. It clearly shows that in the third column of the Verification Report, the Superintendent calculated the amount of deduction @ 9.5% as claimed by the appellant, while in the fourth column the Superintendent calculated the actual "interest on receivables" and "collection charges". These figures were arrived at after inspection of the records, including the invoices.
The Assistant Commissioner was required to take a decision after remand from Supreme Court and even though the Assistant Commissioner had earlier required the Superintendent to submit a Verification Report, but he completely failed to take this Verification Report into consideration while passing the order date 31.12.2014. The Assistant Commissioner held that the appellant was not entitled to claim deduction on account of bank charges and in regard to "interest on receivables", the Assistant Commissioner held that the appellant had not submitted any documentary evidence to substantiate its version that interest an account of delay in payment was included/inbuilt in the price charged for the goods at the time of clearance.
At this stage, it would be pertinent to refer to the order dated 26.04.2006 passed by the Deputy Commissioner in connection with the seven show cause notices that had been issued to the appellant for the subsequent period from January 1998 to June 2000. The gist of the order is as follows:-
i) There is considerable force in the submission of the assessee that interest component on receivables is inbuilt in the assessable value of the goods;
ii) This is also true for bank collection charges. In other words the bank collection charges are also inbuilt in the assessable value of the goods;
iii) However, where the total expenditure actually incurred on both the aforesaid account is less than that claimed by the assessee @ 9.5%, then no deduction should be allowed from the assessable value;
iv) But if the total expenses actually incurred on both the account is more than that claimed by the assessee @ 9.5%, then in that case deduction to the extent of 9.5% should only be allowed from the assessable value.
The Superintendent, in his verification report dated 17.06.2010, only followed the direction at (iii) and (iv) but failed to notice the observations made at serial no's. (i) and (ii) in the order of the Deputy Commissioner.
It also needs to be noticed that the against the aforesaid order dated 26.04.2006 of the Deputy Commissioner an appeal was filed before the Commissioner (Appeals) but the appeal was dismissed by order dated 26.09.2006. This order was assailed by the assessee before the Tribunal by filing in Excise Appeal No. 3906 of 2006. Two appeals, namely Excise Appeal No. 1681 of 2005 [filed against the order dated 18.02.2005 passed by the Commissioner (Appeals)] and Excise Appeal No. 3906 of 2006 [filed against the order dated 26.09.2006 passed by the Commissioner (Appeals)] came up for hearing before the Tribunal. The Tribunal noticed that the only issue before it was whether deduction on "interest on receivables" and collection charges should be based on the delay in payment for each invoice without any fixed percentage (i.e. 9.5%) or it should be @9.5%. This was for the reason that the Deputy Commissioner had recorded categorical findings that "interest on receivables" and 'bank charges' were inbuilt in the value of the goods and, therefore, deduction was to be allowed. The Tribunal accepted the claim of the assessee and held that deduction on "interest on receivables" and "bank charges" has to be given based on the delay in payment for each invoice without any fixed percentage. It would be useful to reproduce the findings of the Tribunal which are as follows:-
"In these two appeals, the short point arises for consideration is whether the average rate of interest shall be admissible as deduction while arriving at the assessable value or the actual interest receivable shall be deducted from the assessable value, on account of interest on receivables.
Such an issue was initially before the Hon'ble Supreme Court coupled with a dispute about whether interest is to be computable with the lapse of time. So far as the admissibility of deduction is concerned, in the case of the appellant reported in 2004 (167) E.L.T.369 (S.C.), Hon'ble Supreme Court following three earlier judgments, came to the conclusion that the interest on receivable is to be deducted while determining assessable value. This is patent from para 9 of the judgment. For calculation of interest and to ascertain its quantum para 10 of the judgment has dealt with that aspect. Hon'ble Court has also remanded the matter to ascertain claim of receivable on the basis of time lapse between the delivery of goods and realizing of monies.
While the matter stood as above, the controversy came before us is to decide the quantum of deduction available to the appellant when in the remand proceeding the appellant did not succeed before authorities below. There was conflicting stand of Revenue at different times with proposition that average rate is admissible and also actual quantified amount is admissible. While judgment of Apex Court was clear on the point, Learned Authorities below failed to implement Apex Court judgment in proper spirit. When the appellant came forward to claim deduction in respect of interest receivable on each invoice on actual basis, that should have been well decided without applying an average formula as per ratio laid down by Apex Court. Interest being time related and also value based, that has been held to be admissible deduction. Once the claim of the appellant is in relation to the time elapsed to recover the consideration of sale, the appellant cannot be denied of deduction.
There being no dispute about the admissibility of deduction of interest on receivables from the assessable value in the case of the appellant and the matter having been well settled by the judgment of Apex Court in the own case of the appellant, deduction of actual interest receivable in respect of each invoice is to be allowed. This is possible interpretation that Revenue has to make to reduce the litigation when the Apex Court in no uncertain terms laid down the law in paras 9 and 10 of the judgment and made it clear that the deduction is undeniable.
Learned DR submitted that interest has to be shown separately in the invoice. But such a plea is not supported by law when no provision of law was shown to us for appreciation. Once the deciding factor is lapse of time in between the delivery of goods and realization of money, that becomes basis for calculation of interest in respect of each amount involved in the invoice concerned. Our observation above calls for setting aside the order of the appellate authority below. We order accordingly and allow appeal of the appellant."
(emphasis supplied)
The Tribunal, it needs to be emphasized, decided the aforesaid appeals taking into consideration the judgment of the Supreme Court rendered earlier in the case of the appellant and even noticed that conflicting stands had been taken by the Department. The Tribunal clearly observed that there was no dispute about the admissibility of deduction of "interest on receivables" from the assessable value in the case of the appellant and in view of the decision of the Supreme Court, deduction of actual interest receivable in respect of each invoice has to be allowed. This order of the Tribunal, which squarely covers the controversy involved in this appeal, has attained finality as learned counsel for the appellant stated that no appeal was filed by the Department to assail this order of the Tribunal and this fact has not been refuted by the learned Authorized Representative of the Department.
This decision of the Tribunal was rendered on 11.05.2011, but both the Assistant Commissioner in the order dated 31.12.2014 and the Commissioner (Appeals) in the order dated 06.03.2018 completely ignored the decision of the Tribunal, which was binding on them and in fact both the Assistant Commissioner and the Commissioner (Appeals) had proceeded to rely upon the order dated 26.04.2006 passed by the Deputy Commissioner against whose order the appeals were decided by the Tribunal, after the Commissioner (Appeals) had rejected the challenge made by the appellant to the order dated 26.04.2006 passed by the Deputy Commissioner. The Assistant Commissioner and the Commissioner (Appeals) were, therefore, obliged to take into consideration the order dated 11.05.2011 passed by the Tribunal. This apart, only part of the order dated 26.04.2006 of the Deputy Commissioner was noticed and that part which held that "interest on receivables" and bank "collection charges" were inbuilt and were required to be deducted from the assessable value was ignored. The Assistant Commissioner and the Commissioner (Appeals) were not required to examine whether the amount on 'interest on receivables' and 'bank charges' is inbuilt in the price, but yet they not only proceeded to examine it but recorded a finding against the appellant.
One additional reason as to why this appeal has to be allowed is that the Department cannot be permitted to take contrary stands in regard to the same issue. The Tribunal, its decision dated 11.05.2011, had allowed the claim of the appellant in regard to the subsequent period holding that the actual "interest on receivables" should be deducted from the assessable value and the said order of the Tribunal has attained finality. The Department cannot be permitted in this appeal to contend that either no deduction should be made or at best, deduction can be made at the average rate of 9.5%, as claimed by the appellant.
This issue was examined by the Supreme Court in Commissioner of C. Ex., Hyderabad vs. Novapan Industries Tries Ltd., 2007 (209) E.L.T. 161 (S.C.) and the relevant portion of the judgment is reproduced below:
"11. In our view, the point in issue is squarely covered by the judgment of this Court in MRF case [(1986) Suppl. SCC 751] read with the subsequent order passed in the Review Petition reported in (1995) 4 SCC 349.
The Tribunal in its order has relied upon its earlier judgment in ICI India Ltd. v. CCE, Hyderabad [2000 (91) ECR 152 (T)] in which the similar issue was involved and the Tribunal had taken the view that interest being inbuilt in the price which had not been charged separately, was deductible from the assessable value.
xxxxxxx
Counsel for the Revenue fairly concedes that the Department did not file an appeal against the decision of the Tribunal in ICI India's case (supra). Thus, the same has attained finality.
In view of a catena of decisions of this Court, it is settled law that the department having accepted the principles laid down in the earlier case cannot be permitted to take a contra stand in the subsequent cases [See: Birla Corporation Ltd. v. CCE [2005 (186) E.L.T. 266 (S.C.)], Jayaswals Neco Ltd. v. CCE, Nagpur [2006 (195) E.L.T. 142 (S.C.)] etc.]
The point in issue being concluded by the decision of this Court in MRF case (supra) and the fact that the Revenue did not file an appeal against the order of the Tribunal in ICI India case (supra), we do not find any merit in these appeals and dismiss the same with no order as to costs."
(emphasis supplied)
A Division Bench of the Tribunal in M/s. Rosmerta Technologies Ltd. vs. Commissioner of C.E. & ST, LTU Delhi, Service Tax Appeal No. 57703 of 2013 decided on 25.11.2019, also had an occasion to examine this contention. It was held that when for a subsequent period in the own case of the appellant it was held that service tax cannot be levied, which order had attained finality, the Department cannot be permitted to take a stand in the pending appeal that service tax is leviable. The relevant portion of the decision is reproduced below:
"16. Learned Counsel for the Appellant, on instructions, has stated that the aforesaid order dated 31 December, 2015 of the Commissioner has also attained finality as the Department did not file any Appeal.
The submission of the learned Counsel for the Appellant is that in such circumstances, the Department cannot agitate that the Appellant is liable to pay Service Tax under BAS. To support this contention, learned Counsel has placed reliance upon a decision of Allahabad Bench of this Tribunal in Shri Niraj Prasad vs. CCE & ST, Kanpur decided on 17 July, 2019.
In this view of the matter, when the Commissioner in regard to the appellant own case for a subsequent period held that Service Tax cannot be levied under the category of BAS, which order of the Commissioner attained finality, the Department cannot be permitted to contend in this appeal that Service Tax under the category of BAS can be levied upon the Appellant."
(emphasis supplied)
In Shri Niraj Prasad vs. CCE & ST, Kanpur, Service Tax Appeal No. 3834 of 2012 decided on 17 July, 2019 it was sought to be submitted by the Appellant that the Department cannot be allowed to discriminate between various assesses on the same issues. A view was taken that the centres of the Appellant would not be required to pay Service Tax under BAS, if Service Tax had been paid on the entire amount by the agency. This submission was made in view of the order dated 25 October 2012 passed by the Commissioner (Appeals), which order had attained finality. It is in this context that the Tribunal held that once the Department has permitted the order to attain finality, it cannot be permitted to contend that the Appellant should also be required to pay Service Tax on BAS and to arrive at this conclusion, reliance was placed on the decision of the Supreme Court in Damodar J. Malpani v. Collector of Central Excise, 2002 (146) E.L.T. 483 (S.C.).
The order passed by the Commissioner (Appeals) cannot be sustained for this reason also.
Thus, for all the reasons stated above, the impugned order dated 06.03.2018 passed by the Commissioner (Appeals) deserves to be set aside and is set aside. The appeal is, accordingly, allowed.
(Order pronounced on 31.08.2021)