ORDER
C.N.B. Nair, Member (T)
1. Heard both sides and perused record.
2. The appeal is directed against duty demands made in respect of free supply of ‘receivers’ and certain receipts during the period 1989-92. The demands have been raised on the ground that the short levy had taken place on account of suppression of facts with intent to evade payment of duty. The demand has been confirmed by invoking proviso to Section 11A of the Central Excise Act.
3. Duty demand of over Rs. 8 lakhs is in respect of free supply of receivers. The submission of the learned Counsel for the appellant is that the receivers in question were supplied free along with Direct Reception Systems (DRS). He has pointed out that the fact about such free supply had been mentioned in the price list filed in proforma-II from time to time. Learned Counsel also pointed out that such free supply was figuring in gate passes issued as well as in the invoices. The contention of the learned Counsel is that once the fact of free supply was mentioned in price list, GP-I and invoices, Revenue authorities were not justified in invoking proviso to Section 11A. The learned DR, however, submitted that the appellant has produced only sample gate pass and this does not establish the fact in regard to the entire quantity of receivers removed.
4. Free supply of receivers found mention in the price list, GP-I and invoices. Thus, the fact of the receivers being supplied free was in the knowledge of the department. On the question of the quantity actually supplied free, there is no evidence from the department that there was any clandestine sale of the receivers. It is evident that the entire supplies were made free as mentioned in the appellant’s statutory and other record. In that factual situation, it has to be held that there was no suppression of facts with intent to evade payment of duty. Therefore, the extended period of time as claimed in show cause notice (under proviso to Section 11A) was not available to the Revenue. The demand has to be treated as hit by limitation.
5. The second demand of about Rs. 6 lakhs is in regard to notional interest on ‘advances’ taken from buyers. The contention on this point is that the revenue has treated the entire advance as attributable to duty paid clearance of goods into the domestic market, while the appellant’s explanation was that bulk of the advance was in regard to exports. On this issue also the appellant’s contention is that the fact about ‘advance’ was known to the revenue authorities inasmuch as the price list was filed under Part-II and each contract made specific mention about the advance, if any, taken. The appellant also has a contention that the duty demand has been raised without going into the question as to whether the advance had any effect on sales price i.e., whether the sale prices were lower on account of the advances. The learned Counsel for the appellant has submitted that, according to circular dated 22-6-98 of the Board, Revenue had to show that the sale price was lower on account of advance. But no such allegation has been made in the show cause notice. The learned Counsel has also pointed out that the Commissioner has proceeded on the erroneous basis that no such duty lay on the revenue. Learned Counsel has referred to the judgment of the Hon’ble Supreme Court in the case of CCE, Mumbai-III v. I.S.P.L. Industries Ltd. in support of his contention that it was for the revenue to establish by adducing evidence that interest free advance had affected price. The learned Counsel, thus, contends that on limitation as well as on merits the demand is required to be set aside.
6. We find merit in this contention. The revenue’s contention is based on the judgment of the Apex Court in the case of Metal Box India Limited v. Collector of Central Excise, Madras . In the facts of the present case, this judgment does not seem to have any application, inasmuch as the working capital of the manufacturer was not derived from the advances drawn from the buyers. The judgment of the I.S.P.L. Industries Ltd. would be more appropriate. In any event, the Commissioner has proceeded on the basis that the fact as to whether the advance had affected the price is not required to be gone into at all. This is contrary to the position clarified in the aforesaid circular of the Board. We are, therefore, of the view that on merits as well as on limitation this demand is required to be set aside.
7. The third major ground for demand of about Rs. 12 lakhs is in regard to installation and commissioning charges. The appellant’s first objection to this demand is that the present demand is much in excess of the demand which had been confirmed in the original proceedings. The original proceeding was in regard to profit earned from installation work, while the present demand is on the entire realisation for installation and commissioning charges. The learned Counsel has submitted that these details are of no relevance inasmuch as installation and commissioning charges are not liable to be included in the assessable value at all, since they have no relation to manufacture of goods.
8. It is well settled that installation and commissioning charges, which are collected separately for providing those services cannot form part of the assessable value of manufactured goods. Therefore, this demand also is not sustainable.
9. Duty demand of about Rs. 16,000/- is on the ground that the appellant’s dealers are also advertising and those costs will form part of the assessable value. This demand is being contested on the ground that the advertisement cost incurred by the dealers are not to form part of the assessable value inasmuch as dealers also benefited from those advertisements. The appellant’s contention on this ground merits acceptance, inasmuch as this is in conformity with the judgment of the Apex Court in the case of Philips India .
10. The appellant is not contesting denial of Modvat credit amounting to Rs. 1,925.50.
11. In view of what is stated above, Modvat credit, which is not contested, is confirmed. The remaining duty demands and penalties are set aside. The appeal is ordered in these terms. The appellant shall be entitled to consequential relief, if any.
(Dictated and pronounced in the open Court on 26-9-2005).