GABRIEL INDIA LIMITED Vs. COMMR. OF C. EX.

JUDGEMENT

(1.) THE appellants M/s Gabriel India Limited are manufacturers of thin walled bearings, bushes, washers etc., which are liable to central excise duty on ad valorem basis. The appellants claimed, inter alia, deduction towards interest on receivables from the sale price for the purpose of arriving at the assessable value for levying Central Excise duty. The claim was on the ground that where there is time lag between the sale of the goods and the receipt of payment, the interest for the period between the sale of the goods and the receipt of the payment is required to be deducted from the amount realised so as to make the assessable value equal to the price at the time of sale of the goods. However, this claim of the appellants has been rejected on the ground that there was no separate interest levied on account of the delay in payment for the goods and that where interest is not separately collected, deduction is not permissible. As against this, the appellants have submitted that deduction towards interest on receivables is permissible irrespective of whether the interest is recovered separately or is built into the gross price of the goods. The appellants have placed reliance on the decisions of the Supreme Court in the case of Madras Rubber Factory in support of their claim. They had submitted in the appeal before the Commissioner also that facts in the MRF case were that the goods were sold from the appellants' depots and the claim was for deduction of interest on receivables when interest was not separately charged. All the same, the Supreme Court held the interest on receivables to be eligible for deduction in its original MRF judgment reported in 1987 (27) E.L.T. 553 (S.C.) and in the subsequent judgment in the MRF case reported in 1995 (77) E.L.T. 433 (S.C.). In the present appeal before the Tribunal, the appellants have also submitted that this position remains accepted by the Tribunal in the case of ICI India Ltd. v. Commissioner of Central Excise, Hyderabad in its final order No. 2823/99, dated 4 -11 -1999 passed by the South Zonal Bench of the Tribunal. In that case also, interest on receivables was not being charged separately. All the same, relying on the decisions of the Supreme Court in the MRF cases, the Tribunal held that deduction towards interest on receivables is permissible even when the interest is not charged separately. The learned counsel drew our attention in particular to Para 16 in the original judgment and Para 66 in the subsequent judgment which had been specifically followed by the Madras Bench also. These are reproduced below : -

(2.) FROM the aforesaid observations of the Supreme Court in the MRF cases and the decision of CEGAT in ICI India Ltd. case, it is clear that for the purpose of deduction of interest on receivables, it is not relevant as to whether the interest is collected separately or forms part of the gross price. This being the correct legal position, the denial of deduction towards interest on receivables in the present case was not justified on the ground that the same was not being charged separately. The matter is, therefore, required to be re -considered by the jurisdictional authorities and suitable deduction allowed. The impugned orders are accordingly set aside and the case remanded to the jurisdictional Assistant Commissioner for granting necessary relief to the appellants after ascertaining the correct position about the amount of deduction correctly due on account of interest on receivables.