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Bill Discounting Charges

hari (excise incharge) (102 Points)

10 April 2009

We are giving bill doscounting facility to our customers for which some certain limit has been given by our bank.. We are preapiring the Hundi and after getting nod from the customer we discounted the bill at our bank. The Bank is chargeing interest for the days for which the hundi has been prepared from our accounting. The we are recovering the same amount from the customer by way of Debit Note. Now, during the course of Central Excise Audit the audit party objected this and asking us to include this amount in the assessable value. please advise me whether it is includable in the assessable value or not.

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2 Replies

Don Bosco.C (Consultant) (234 Points)
Replied 10 April 2009

Dear Mr.Hari,

according to sec 4 of CEA you need not to include the value in assessable value. because it has been treated as discount given to the customer.. please mail me if u need further details.

hari (excise incharge) (102 Points)
Replied 11 April 2009

Originally posted by :Don Bosco.C

Dear Mr.Hari,

according to sec 4 of CEA you need not to include the value in assessable value. because it has been treated as discount given to the customer.. please mail me if u need further details.

They are citing the case of national leathercloth ltd Vs Union of India 2003(156)E.L.T.654(Bom)(

7.As regards the claim of deduction on account of bill discounting charges, the adjudicating authority has held that before the sale price is credited to the account of the Petitioners, they withdrew the amount from the bank for which the bank charged interest to the company, and such an arrangement was in the nature of overdraft facility. From the facts on record, it is seen that the customer is making full payment to the company through the documents presented to the bank, but the company chooses to prematurely encash the documents. If the amount of interest paid by the company to the bank out of the sale proceeds is on account of premature encashment, then such expenditure cannot be considered to be post-manufacturing expenses. Therefore, in view of above findings given by the adjudicating authority to the effect that the interest charges paid by the Petitioners is on account of the overdraft facility availed by them, the same cannot be treated as post-manufacturing expenses and refusal to deduct said interest charges from the assessable value cannot be faulted. In this view of the matter both the claims of the Petitioners fail.