ORDER
Moheb Ali M., Member (T)
Page 0615
1. Vide the impugned order the Commissioner held that interest of 24% collected on delayed payments should form part of the assessable value of goods. The appellants contended before him that interest on delayed payments can not form part of assessable value and that their case is covered by the Supreme Court’s decision in the case of Government of India v. MRF . The Commissioner however upheld the order of the lower authority on the ground that Board’s Circular dt. 31.12.93. clarified that interest is not addable to the assessable value if interest is charged for delayed payments. But in the present case the appellants charged interest even for payments during the normal credit period. Secondly, the Commissioner relied upon the circular, which seem to have clarified that when an assessee charges interest at the rate higher than the normal rate of interest charged by Bank then that extra percentage should be added to the assessable value. The Commissioner accordingly upheld the order of the lower authority.
2. Heard both sides.
Page 0616
3. The main contention of the Ld. Advocate for the appellants is that Commissioner’s observation that interest is charged even for settlements done during the normal period of credit is not based and facts. He argued that interest is chargeable only when delayed payments are made. Such interest charged for default on the part of a customer cannot be a part of the assessable value in terms of the decision of the Supreme Court (Supra). He also argued that the normal rate of interest charged by the appellant is 24% for delayed payments and even if this rate is higher than the bank rate it still it is not addable to the assessable value. He relied upon the decision of the Supreme Court in the case of Baroda Electric Meters Ltd. v. Collector of Central Excise wherein the Apex Court held that extra amounts collected in the name of transportation charges cannot be added to the assessable value as those amounts represented profit of activity of transportation and not from the activity of Manufacture. He argued that ratio of this judgment even though it was delivered in a different context is applicable to the facts of this case.
4. We have carefully considered the rival contentions. We agree with the Ld. Advocate that there is no evidence to suggest that the appellant collected interest even when payments are made in time. In so far as the contention of the Revenue that the interest rate is higher than the bank credit, we agree with the Ld. Counsel that even if that were the case the amounts recovered by way of interest cannot be added to the assessable value as there is no nexus between the value of the goods and the interest charged for delayed payments. The appeal is accordingly allowed.
(Dictated in court)