ORDER
K.K. Usha, J. (President)
1. This is an appeal at the instance of the assessee M/s Maruti Udyog Limited challenging the order dated 28.9.91 passed by the Commissioner of Central Excise (ADJ.), New Delhi. Under the impugned order the Commissioner has confirmed duty demand of Rs 10,84,88,450 against the assessee invoking the provisions of Section 11A(2) of the Central Excise Act, 1944. He has also imposed a redemption fine of Rs. 10,00,000 and a penalty of Rs. 50,00,000. The relevant period is 1.4.1989 to 31.3.1990 and the show cause notice dated 11.11.91.
2. The appellant is a manufacturer of Cars falling under Chapter 87. They sell these cars to dealers, Government buyers like DGS & D, Police, buyers who make payment in foreign exchange, buyers against manufacturer’s quota, fleet owners and other bulk buyers. The issue that is arising for consideration in this appeal is whether interest received on booking deposit taken from the buyers has to be added to the assessable value. While the appellant contents that the sale price to all buyers or class of buyers continued to be the same, that there is nothing to show that the receipt on deposits has in any way suppressed the value of the car and therefore by applying the principles of the decision of the Apex Court in VST Industries Ltd. v. CCE, Hyderabad 1998 (97) 395 (SC) and various decisions of this Tribunal interest on deposit is not liable to be added to the assessable value. On the other hand the Revenue would contend that Press Note issued by the appellant dated 18.8.89 would clearly show that interest received on deposits has direct nexus to the price of the car. On this question of invoking the larger period of limitation the assessees contended that the issue regarding addition of interest on deposits of the assessable value was raised in the audit note as early as 20.3.86 and the pattern of marketing was known to the department. Therefore, the invocation of larger period is totally unwarranted. On the contention the Revenue would submit that it is not relevant whether the department was aware of the fact of appellant receiving advance from the buyer but the fact of existence of nexus between the extra interest earned on these advances and assessable value came to the knowledge of the department only when the Press Note was released on 18.8.89. This was followed by investigation and ultimately show cause notice was issued on 11.11.91. Therefore, the invocation of larger period is justified in the present case.
3. The appellant has collected booking deposit of Rs. 10,000 from the customer during the year 1983,1985 and 1986. Supply of the car to the customers who made booking deposit in 1986, was over only in the year 1990. It is not disputed that throughout the period there is no difference in the price of the cars between customers who had made booking deposit and those who have not made booking deposit. But the contention raised by the learned DR is that it is not necessary that the interest received from the deposit results in suppressing the value of the car sold to only that class of customers who had made deposit. If the interest on deposit received from some of the customers will have effect on the price charged from all classes of the buyers, it is sufficient to add the interest to the assessable value. In support of his contention he relied on an observation by the Supreme Court in paragraph 14 of VST Industries Ltd. v. CCE, Hyderabad 1998 (97) ELT395 which reads as follow:
14. Excise duty, as has been held, is on the manufacture of goods at the price paid The price paid in the present case is the same by all the dealers. There is nothing to show that there was any special consideration which was shown to the dealers who had given the security deposit. Nor has it been shown by the reference to any documents or data that because of the receipt of such deposit the price charged from all the buyers was reduced.
According to the Ld. DR the Press Note dated 18.8.89 would show that interest from the customer deposit has nexus to the price of the car sold to all customers. In the Press Note primary reason for increase in the price of the car are given as;
(a) Increase in input cost
(b) Loss of interest income from the customer deposits with the discontinuation of bookings for the Maruti 800 car.
(c) Change in payment system for sale of vehicles to be introduced from Sept. 1, 1989, which will result in additional financial cost to the company in selling of its vehicles.
4. Learned Counsel for the appellant would submit that there is error in Press Note. With reference to the resolution of the Board of Directors dated 8.8.89 the learned Counsel would contend that the change in the payment system introduced from 1.9.89 did not result in additional financial cost of the company but the additional financial burden was placed on the dealer. The Board therefore decided to increase the dealer’s commission. It was also submitted by the Ld. Counsel that there is no merit in the contention that the discontinuation of the booking was the reason for increase in the price. It was in 1986 last time the customer deposit was received and the interest thereon was available with the company when the price was increased in 1989. As mentioned earlier, the cars which were booked in 1986 were delivered only in 1990. The above would clearly show according to the learned Counsel for the appellant that even when the interest on deposit was available with the assessee, the price had to be increased due to other reasons. It was also submitted that in the case of other automobile manufacturers this Tribunal has allowed their contention that the interest on deposit is not to be included in the assessable value. Reliance was placed by the appellant on the Final Order No. 958/99-A dated 6.7.99 in the case of LML Ltd. v. CCE, Kanpur, Bajaj Auto Ltd. v. CCE, Pune Final Order No. 1529/98-A dated 18.12.98, Hero Honda Motors Limited v. CCE New Delhi 2000 (124) ELT 552 (T) and its own case in Final Order No. 951/99-A dated 1.7.1999.
5. Even though elaborate contentions were raised by both sides on the merits of the demand, we do not think it necessary for us to enter a finding on the merits of the demand since we are of the view that the Revenue has failed to justify invocation of larger period of limitation in this case.
6. It is admitted by the Revenue that the marketing pattern of the appellant and the fact of its booking deposit from the customers from 1983, 1985,1986 and also appropriating a portion of the interest to itself were in the knowledge of the department. The audit note of the year 1986 is also not denied But the contention of the learned DR that the fact that such interest on deposit has an effect on the price of the cars was suppressed by the assessee till it issued the Press Note on 18.8.89. Thereafter investigations were made and show cause notice was issued on 11.11.91 for the period of dispute from 1.4.89 to 31.3.89.
7. We find no merit in this contention of the Revenue. The relevant portion of the Audit report dated 20.3.1986 reads as:
In the present case the booking of vehicle was an essential condition for sale of the vehicle, amount of Rs. 10,000 received without bearing any interest for deliveries within one year and simple interest of 7% per annum for deliveries thereafter was thus additional consideration.
The investments, made out of deposits so received, at higher rate of interest and compounded annually compared to no payment of interest for deliveries within one year and 7% simple interest thereafter resulted into yield of excess amount. Therefore, the differential amount of interest accrued was additional consideration which should have been taken into account while computing assessable value. So the assessable value remained undervalued.
Due to under-valuation to the extent of Rs.30436835, the CVD (BED + SED + CESS) was short levied to the tune of Rs.4823848.50 as detailed in Annexure B to this para.
The letter is brought to the notice of the Asstt. Collector, Central Excise for necessary action under intimation to audit.
The reply to the Assistant Commissioner dated 30.4.86 to audit would show that the matter was being brought to the notice of higher authorities of the Department Therefore, the Department was clearly aware of the marketing pattern followed by the assessee. When the basic and primary fact namely that the assessee is taking booking deposit from the customer and that a portion of the interest is appropriated by the assessee were known to the Revenue, it cannot be contended that the assessee is guilty of any willful mis-statement or suppression of facts. Whether the price of the cars will be affected by such interest accrued on the deposit is a matter to be examined by the Revenue on the basis of the facts available. Ld. Counsel for the appellant correctly placed reliance on a decision of the Supreme Court in ITO v. Lakhmani Mewal Das 1996 (103) ITR 437 in support of the assessee’s contention. While considering the provisions under the Income Tax Act the Apex Court observed as follows:
The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income Tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income Tax Officer with regard to the inference which he should draw from the primary facts.
8. Apart from the above there is no justification for delaying the show cause notice upto 11.11.91 even if the Revenue’s contention that the assessee disclosed correct facts only on 18.8.89 is accepted.
9. In the light of the above discussions, we hold that there was no justification in the present case for the Revenue to invoke the larger period of limitation. Therefore, the show cause notice dated 11.11.91. is issued beyond the period of limitation and no demand can be raised on the basis of the above show cause notice.
10. In the result, we set aside the impugned order and allow the appeal.