ORDER
P.G. Chacko, Member (J)
1. After examining the records and hearing both sides, we note that the appellants had supplied their products to a common buyer viz. M/s. TELCO Ltd. during the respective periods of dispute on payment of duty on assessable values which did not take into account certain interest paid by M/s. TELCO to their bankers under what is called ‘Bill Marketing Scheme’ or ‘BMS arrangement.’ The assessees (appellants) allowed cash discount of 1.9% to the buyer subject to condition that the discounted price of the goods be paid within 48 hours. The relevant invoices mentioned this discount separately. Under the BMS arrangement, which was provided by the buyer, the assessees collected payments of discounted price from HDFC bank within 48 hours from the date of delivery of the goods to the buyer. No amount other than the discounted price of the goods was received by the assessees from the buyer or the bank, a fact acknowledged in the impugned orders. Under the BMS arrangement, the bank received interest from M/s. TELCO which happened to be equal to the discount allowed by the assessees to the buyer. Such collection of interest was occasioned by belated remittances of amounts to the bank by M/s. TELCO. In the impugned orders, learned Commissioner included these interest amounts in the assessable value of the goods covered by the respective invoices. Accordingly, differential duty was demanded from the assessees and penalties imposed on them. The present applications are for waiver of predeposit and stay recovery in respect of these amounts.
2. After giving careful consideration to the detailed arguments put forward by learned Counsel and learned SDR, we note that it is not in dispute that the discounted price alone was received by the assessees and there was no financial flow back so as to influence the assessable value. In other words, the invoice price, discounted, has been accepted as the transaction value of the goods. It appears from the arguments that the question which arises for consideration is whether the interest paid by the buyer to their bankers under the financial arrangement between them, to which the assessees had no privy, requires to be included in the assessable value of the goods sold by the latter to the buyer. We have noticed 2 circulars of the Board, No. 354-81-2000-TRU dated 30-6-2000 and No. 643-34-2002-CX dated 1-7-2002, which clarified the point. Accordingly, the net price of the goods, after cash discount allowed by the seller to the buyer in a case of immediate or reasonably prompt payment of sale price by the latter, must be accepted as the assessable value of the goods inasmuch as such price is covered under the definition of ‘normal transaction value’. Learned Counsel for the assessees have also pleaded limitation against the demands of duty except in the case of M/s. Sundaram Clayton Ltd., in whose case the show-cause notices were issued within time.
However, it is urged that, on merits, the assessees have prima facie case. Learned SDR, on the other hand, opposes the above claim and submits that the so-called BMS arrangement is nothing but “bill discounting” i.e., deduction made by the bank for premature encashment of assessee’s bills. It is submitted that such amounts are not deductible from the assessable value as held by Tribunal in the case of Zenith Ltd. v. Commissioner of Central Excise, Aurangabad. Learned SDR submits that the above decisions of the Tribunal has been upheld by the Supreme Court vide . The Tribunal’s order has not been placed before us. What appears from the brief report on the Supreme Court’s decision is that there was an arrangement between the assessee and their bankers, which had nothing to do with the transaction between the former and their buyer. The facts of the present case are altogether different inasmuch as the assessees had nothing to do with the financial arrangement between their buyer and HDFC bank. They were only concerned with prompt payment of sale price of the goods supplied by them to M/s. TELCO. They did not mind who paid it. The buyer’s bankers paid the money within 48 hours from the time of delivery of the goods to them by the assessees. There ends the transaction between the assessees and their buyer. If the buyer delays remittance to their bankers under the above scheme, it is for them to pay interest on the moneys. This was precisely what was done by M/s. TELCO in these cases. The transaction between M/s. TELCO and their bankers did not confer any monetary benefit on the assessees. Presumably it is in similar circumstances that the Board clarified as above in the respective circulars.
3. It is also noticed that, on a similar set of facts, learned Commissioner (Appeals), Chennai, in Order-in-Appeal No. 56/2005 dated 25-10-2005, took the view that the interest received from the buyer of the goods by their bankers was not to be included in the assessable value of the goods purchased by them from assessee. The appellate Commissioner’s order prima facie arrears to have taken a preeminent stand on the contentious point.
4. The appellants have made out a prima facie case for waiver of predeposit and stay of recovery on merits. Hence without entering into limitation issue, we grant waiver and stay us prayed for.
(Dictated and pronounced in open Court)