HINDALCO INDUSTRIES LTD. Vs. CCE

JUDGEMENT

(1.) THE appellants M/s Hindalco Industries Ltd. is a manufacturer of aluminium and its product. These goods were liable to Central Excise Duty on ad valorem basis. Accordingly, they cleared the goods after payment of duty during the years 1992 -93 to 1997 -98. Duty was worked out on the sale prices from the factory to the various buyers. However, two Show -Cause Notices dated 22.9.97 and 11.2.2000 were issued subsequently alleging that there was short -levy of duty on account of under -valuation of the goods by the appellants. The order impugned in the present appeal confirmed those duty demands and imposed an amount equal to the duty held as short -paid as penalty. Thus, the impugned order has raised a duty liability of over Rs. 2.0 crores and the same amount as penalty. The ground for confirming the duty demand is that a scrutiny of the balance sheet of the appellants for the years from 1992 -93 to 1997 -98 showed that there were outstanding advances in each year to the tune of over Rs. 6.0 crores to Rs. 12 crores in each year. The impugned order has taken the view constituted that since these advances from customers (was) interest free working capital for the appellant, a notional interest on these advances should be added to the sale price of the goods cleared by the appellants for the purpose of determining the assessable value (normal price) of the goods. Accordingly, duty demand has been confirmed taking a notional interest of 18% per annum. The Commissioner has held that such an action is in conformity with the dictum contained in the judgment of the Apex Court in the case of Metal Box India Ltd., 1995 (49) ECC 67 (SC) : 1995 (75) ELT 449 (SC). The impugned order has also noted that examination of the records of the appellants by Assistant Director (Cost) of the Department has shown that sale prices were lower on account of the advances.

(2.) THE appellants have contended that the findings reached by the Commr. are contrary to the facts of the case and are wholly illegal. It is their submission that treating credit balance in the balance sheet as advance is entirely incorrect. It is pointed out that a Balance Sheet indicates the company's assets, liabilities etc. as on 31st March. This does not mean that credit balances are advances taken for any particular length of time so as to confer any financial benefit on the company. The appellants also point out that the Commr. has seen only half the picture. As against the credit balance there were much bigger debit balances. The appellants have supplied the contrasting position as under: Year Credit Balance Debit Balance 1992 -93 Rs. 6.32 crores Rs. 72,19 crores 1993 -94 Rs. 11.41 crores Rs. 45.57 crores 1994 -95 Rs. 12.21 crores Rs. 40.89 crores 1995 -96 Rs. 9.68 crores Rs. 66.85 crores 1996 -97 Rs. 10.54 crores Rs. 100.46 crores 1997 -98 Rs. 9.38 crores Rs. 121.15 crores

(3.) IT is also the submission of the appellants that the decision of the Apex Court in Metal Box Industries Ltd. had no application to the facts of the present case. In Metal Box India Ltd. case it was found that Metal Box took huge advances from Ponds India, their buyer, and the sale price was 50% of the normal price, on account of this. In view of the price lowering effect of the advances, the Apex Court held that the advance should be treated as an extra consideration which influenced the price and that sale price was not a commercial price. The appellants have pointed out that, in their case, sale was at a uniform price and advance was no consideration in determining the prices. It is their submission that in such a case the correct law was to be found in the judgment of the Apex Court in VST Industries Ltd., 1998 (59) ECC 235 (SC) : 1998 (97) ELT 395. The Apex Court had held in VST Industries case that when sale price is not influenced by advance, the Metal Box decision was not applicable.