Per Shri T.P. Nambiar :

These appeals are filed by the appellant against the orders passed by the Commissioner of Central Excise in order No. 25/96 dated 20.02.96.

2. Briefly stated the facts of the case are that on scrutiny of the accounts, records, and transactions of the appellant M/s. Lakshmi Machine Works Ltd., (LMW), Unit II, Kaniur Post, Via, Karumathampatti, Coimbatore 638 569, for the period from October, 1985 to September, 1989, it was found that M/s. LMW collected interest free advance deposits from their customers, on contractual binding to ensure non-cancellation of the orders placed by the said customers for supply of Textile machineries. It appeared that by the said financial tie-up, an indirect consideration was created whereby M/s. LMW got an interest-free working capital and that the benefit of interest-free working capital ought to have been reflected in the assessable value of the goods manufactured and cleared by M/s. LMW by way of notional interest on such advances. But on perusal of the accounts and records of M/s. LMW, it was found that they had not included the financial benefit accrued out of the said interest-free advance deposits received by them from their customers and used as interest-free capital by them and adjusted at the time of actual clearance of the goods manufactured by them to their customers. Hence, it appeared that M/s. LMW had not included the benefit of interest-free working capital in the assessable value, and, therefore, a notice dated 30.10.1990 was issued proposing (i) to demand the amount of Rs. 1,87,34,141.70 under Rule 9 (2) of Central Excise Rules, 1944 read with proviso to Section 11A of the Central Excises and Salt Act, 1944, on a nominal interest @ 18% per annum on the advance deposits of Rs. 34,63,95,000.00 adjusted out of the total deposits of Rs. 67,11,30,000.00 received by the assessees during the period from October, 1985 to September, 1989 and (ii) to impose a penalty under Rules 9 (2) and 173Q of the Central Excise Rules, 1944.

3. In response to the show cause notice dated 30.10.1990, M/s. LMW Ltd., Unit I stated, in their letter Ref. No. TMD-I/CE/18730/91 dated 28.03.1991, that they had filed a writ petition in the High Court of Madras on the issue of collection of interest on security deposit received by them and that the Hon'ble High Court was pleased to pass an interim order in WMP No. 112/91 dated 04.01.1991 restraining the Central Excise officers from proceeding further on the issue. Thereafter, the Hon'ble High Court, Madras, in WP No. 74 of 91 dated 10.04.1991, quashed the show cause notice dated 30.10.1990 as well the Trade Notice No. 200/90 dated 26.10.1990 under which instructions had been issued to the effect that interest accrued on advance deposits was includible in the assessable value. However, the High Court had given liberty to the department to issue a fresh show cause notice without reference to the orders quashed about.

4. The department filed Writ Appeal No. 742/91 praying for the suspension of the operation of the order made in WP No. 74/91 dated 10.04.1991 and a Writ Appeal against the order made in WP No. 74/91 dated 10.04.1994. The Hon'ble High Court of Madras in CMP No. 7484/91 in WA 742/91 dated 24.07.1991 dismissed the petition for suspension of the operation of the order and ordered to expedite the writ appeal. Finally, the High Court, Madras, in its order in WP No. 742/91 dated 06.03.1995 has held that it is necessary for the department to point out the extent of benefit obtained by M/s. LMW on interest-free loan (advance deposits) and that it is only the benefit that has been drawn by the assessee has to be loaded by hiking the price charged. Further, the High Court has ordered the department to proceed with the proceedings initiated by the show cause notice, if need be, in the light of the decision of the Supreme Court in Metal Box India Ltd. Vs. Collector of Central Excise, Madras 1995 (75) ELT 449. Accordingly, a show cause notice