1999 (7) TMI 610 - AT - Central Excise

CEGAT Mumbai: Distributor Discount Distinction in Pharma Case Upheld

BEVIT PHARMACEUTICALS PVT. LTD. Versus COMMISSIONER OF C. EX., GOA

The Appellate Tribunal CEGAT, Mumbai addressed the distinction between chief distributor and other distributor discounts in a pharmaceutical products ... Valuation Issues:1. Distinction between chief distributor and other distributors in claiming discounts on sales.2. Interpretation of the assessable value by the Department regarding the discount percentage.3. Application of case law in justifying discounts based on purchase quantities by distributors.Analysis:The primary issue in this case before the Appellate Tribunal CEGAT, Mumbai was the distinction between a chief distributor and other distributors in claiming discounts on sales. The appellant, a manufacturer of pharmaceutical products, claimed a 15% discount for sales to chief distributors and a 10% discount for sales to other distributors. The Department, however, proposed to limit the discount to 10%, arguing that there was no significant difference between chief distributors and other distributors.The advocate for the appellant argued that chief distributors were distinct as they had to maintain a minimum stock, appoint sales representatives, and incur expenses for sending goods to other distributors. However, upon examination of the appointment letters of both chief distributors and other distributors, the Tribunal found no substantial difference in their functions. The Tribunal noted that each distributor was required to keep a one-month stock, and there was no exclusive requirement for chief distributors to engage sales representatives or supply goods only to other distributors.Regarding the interpretation of assessable value and discounts, the Tribunal referred to relevant case law. The Supreme Court's judgment in Metal Box India Ltd. v. CCE was cited, which justified a 50% discount for a buyer purchasing 90% of the manufacturer's product. However, the Tribunal found that the situation in this case did not establish a similar scenario. Other case law examples, such as the Delhi High Court's judgment in Indian Rayon & Industries Ltd. v. Union of India and Tribunal decisions in Gora Mal Hari Ram Ltd. v. CCE, Vibgyor Chemicals v. CCE, and National Auto Accessories Ltd. v. CCE, were also discussed in relation to regional discounts and different rates of discounts based on purchase quantities.Ultimately, the Tribunal concluded that there was no sufficient reason to interfere with the Department's decision, and thus, the appeal was dismissed.