2004 (97) ECC 441 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(A)

Ms. Jyoti Balasundaram, Member (P) and Shri V.K. Agrawal, Member (T)

Kamla Electrodes & Ors.

Versus

Commissioner of Central Excise, Meerut

Appeals No. E/2340,2491-92/2004/NB-A

[Arising out of Order-in-Appeal No. 53/CE/MRT-1/2004 dated 6.2.2004 passed by the Commissioner of Central Excises (Appeals), Meerut]

Final Order Nos. 1008 to 1010/2004/NB/A, dt. 24.9.2004,
Certified on 5.10.2004

Assessable Value

Advances/security deposits taken from customers utilised in investment could not be said that notional interest forms additional consideration -- Revenue had not discharged burden of proving that there nexus between the price of advances/deposits had resulted in depression of the sale price -- Goods manufactured and cleared by appellant not assessable -- Section 4, CE Act r/w Rule 5 of the Central Excise Valuation Rules.

Appeal allowed

PRESENT :

Shri L.P. Asthana, Adv. for the appellants.

Shri S.C. Pushkarna, JDR for the respondent.

Case Cited :

VST Industries Ltd. v. CCE, Hyderabad, 1998 (59) ECC 235 (SC).......................... [Para 2]

Per : Jyoti Balasundaram

M/s. Kamla Electrodes are engaged in the manufacture of welding electrodes, flux, drawn wire and steel scrap and availing the benefit of small scale exemption during the period 1995 to 1998. They sell their goods to their customers both in Meerut and customers in other parts of the country. The price for customers in Meerut are somewhat lower than those for customers in other areas in view of the fact that additional costs have to be incurred for outstation customers. They took certain amounts as security deposits/advances from two of their customers, M/s. Tirupati Electrodes and M/s. Kamla Electrodes P. Ltd. and after receiving the full consideration for sale, security amount/advances are returned to these customers. Notice dated 9.2.2000 was issued to them alleging that the advances/deposits received from the above named customers have been utilised in investment which earned notional interest @ 18% per annum and thus the notional interest so earned was additional consideration and includible in the assessable value in terms of Section 4 of the Central Excise Act, 1944 read with Rule 5 of the Central Excise Valuation Rules. It was alleged that the sales to these customers were made at rates lower than the rates for other buyers from whom such deposits had not been taken so larger period of limitation was invoked in the notice. The Additional Commissioner vide order dated 6.12.2000 confirmed the duty demand of Rs. 1,95,733 and imposed a penalty of equal amount under Section 11AC of the Act as well as a penalty of Rs. 75,000 under Rule 173Q as well as personal penalties of Rs. 50,000 on each of the two partners of M/s. Kamla Electrodes. By order dated 28.2.2003, the Commissioner (Appeals) dismissed the appeal of the manufacturer, the matter was carried in appeal to the Tribunal which allowed the appeal by remanding the case back to the Commissioner (Appeals) for fresh decision in the light of the certificate of the Chartered Accountant as well as invoices relating to others of all Meerut customers and other contemporaneous records which might be produced by the appellants. Hence these appeals.

2. There is no dispute that the goods were sold at comparable prices to other customers in Meerut over and above the sales to M/s. Tirupati Electrodes and Kamla Electrodes P. Ltd. The findings of the Commissioner (Appeals) that other buyers at Meerut are "created ones with well thought out strategy to beguile the adjudicating as well as the appellate authority" is not based on any evidence. Merely because advances/security deposits have been taken from these two customers, no conclusion can be drawn that notional interest forms additional consideration and is to be included in the assessable value of the goods manufactured and cleared by the appellants. The Revenue has not discharged the burden of proving that there is nexus between the price and the taking of such advances/deposits or that the taking of advances/deposits has resulted in depression of the sale price. In these circumstances, the ratio of the Apex Court decision in VST Industries Ltd. v. CCE, Hyderabad, 1998 (59) ECC 235 (SC) : 1998 (97) ELT 395 (SC) is squarely applicable to the facts of the present case. Following the ratio there of, we set aside the impugned order and allow the appeals.

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