- (1.) These appeals are filed under Section 35L (b) of the Central Excise Act, 1944 against an order passed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as the Tribunal). In that proceeding the appellant raised two issues, namely, (i) whether the interest accruing on advances are deductible from the price or not, and (ii) as to deduction of the bank charges and collection charges.
(2.) During the relevant period, the appellant manufactured and sold the goods principally to government and Public Sector Undertakings. On account of the fact that the payments were not effected against delivery or within any specified period, the payments of the prices became delayed averaging between 3 to 12 months and, therefore, the appellant claimed deduction in respect of interest of such receivables calculated for the period between the date of removal till the date of realisation of payment. The deduction so claimed was supported by Certificate of Chartered Accountant for the relevant period. Deductions were also claimed in the price list filed from time to time. The assessing authority, the appellate authority and Tribunal rejected the claim made by the appellant on the basis that the contract did not specifically provide for payment of such interest on sales on credit. The Tribunal stated the matter of law as follows :-- "The interest so deductible is only the interest for the period mentioned in the invoice, otherwise it will lead to unintended consequences. In cases where payment to the manufacturer is indefinitely delayed or where the dealer refuses to pay the price the sale price will stand wiped off, because the interest may exceed price. In such a case, are not the goods liable to excise duty The answer can only be emphatic 'no'. Excise duty is on the manufacturer of the goods. It is not depending on the issue as to whether the manufacturer gets the price of the goods from the dealer or not. So, the interest charged from the date of delivery till the realisation of the price should be understood with reference to the period fixed in the invoice. If the invoice provides a specific period up to thirty days for effecting payment, interest from the date of delivery till the expiry of that period of thirty days alone is deductible from the price mentioned in the invoice." This part of the order is challenged apart from other aspects to which we will advert to a little later.
(3.) It is pointed out that this court had occasion to examine the question as to the value of the goods on the date of removal whether interest on the price for the period during which the payment is deferred has to be deducted or not in the case of Asst. Collector of Central Excise and Ors. v. Madras Rubber Factory Ltd., 1986 Supp SCC 751. This decision again came up by way of review in the decision reported in Government of India and Ors. v. Madras Rubber Factory Ltd. and Ors. 1995 (4) SCC 349. In the second judgment, this court stated as follows :- "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 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 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);