Lajja Ram, Member (T)

1. M/s. Mahavir Aluminium Ltd., Bhiwadi (hereinafter referred to as the 'appellant' or the 'party'), engaged in the manufacture of aluminium products, falling under Chapter 76 of the Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the 'Tariff'), had collected the amounts from their dealers/customers as interest free trade deposits/unsecured loans/advances. No interest was paid on these deposits etc.

2. Under Show Cause Notice No. V(76)17/101/87/Part III, dated 26-7-1988, read with corrigendum dated 8-8-1988, the appellants were asked to show cause by the Assistant Collector, Central Excise, Jaipur as to why the amounts of interest of 18% per annum on the interest free amounts collected by them as deposits/advances against supplies, from their customers, and the interest free amounts of trade deposits from their dealers, for the period March 1988 to June 1988, should not be included in their assessable value.

3. The party was filing price lists in Form Part I for sale to dealers/customers, and in form Part-II for sale to industrial consumers.

4. The Assistant Collector, Central Excise, Jaipur, vide his Order-in-Original No.V(76)17/101/87/Part III, dated 13-2-1989 observed that the assessee was ordinarily selling its goods through the dealers who have provided interest free deposits. In his view, it was a truism to say that no body in the commerce and industry gives interest free loans unless he expects to be benefited by grant of such loans, directly or indirectly. He thought that the seller has very much benefited by such interest free deposits, and that those deposits were the indirect consideration of sale in the hands of the seller. The assessee was having interest free deposits of Rs. 31,45,000/- as on 31-12-1987. The annual interest on these deposits @ 18% worked out to Rs. 5,66,100/-. The Assistant Collector, Central Excise, Jaipur came to a finding that this amount had to be added to the assessable value as the same was a consideration for the sale of the goods. During the calendar year 1987 the assessee had sold goods worth Rs. 11,04,03,836/- to dealers for whom price lists had been filed in Part-I. Accordingly, he ordered the approval of the price lists filed in Part-I, from 30-3-1988 onwards, after addition of 0.51% in the assessable value on account of notional interest earned by the assessee on interest free deposits received from the dealers.

5. The Collector of Central Excise (Appeals), New Delhi, vide Order-in-Appeal No. 34-C.E./JPR/90, dated 30-3-1990, observed that the appellants have obtained advances/deposits from the dealers/customers without paying them any interest that has accrued thereon. He came to a finding that additional consideration existed for the appellant in respect of the sales made to such dealers/customers, who have made advance deposits without getting any interest. The value of such consideration was apparently the amount of interest that has accrued on such deposits. He distinguished the facts from the case of M/s. Indian Oxygen, 1988 (36) E.L.T. 730 (SC), and observed that the dispute in that case before the Hon'ble Supreme Court was about deposits for containers and not for excisable commodity.

6. In appeal, the appellant made the following points:-

(1) Amongst dealers there were a number of those who have furnished security deposits; but there were also dealers who did not make any such deposits; yet the goods of like kind and quality were sold to all the dealers at the same price;

(2) The security deposits were by way of security against goods supplied so that in the event of refusal to receive the goods sold, the appellant company's interest were not jeopardised.

(3) There was no evidence whatsoever on record to show that the customers who had not made the deposits were their favoured buyers.

(4) The interest on the deposits had no nexus with the prices of the goods sold to the dealers. The fact that the price to the dealers who made depos