2004 (5) TMI 414 - AT - Central Excise

Tribunal affirms decision in favor of assessee on trade discount inclusion dispute.

COMMISSIONER OF C. EX., PONDICHERRY Versus NILKAMAL PLASTICS LTD.

COMMISSIONER OF C. EX., PONDICHERRY Versus NILKAMAL PLASTICS LTD. - 2004 (172) E.L.T. 83 (Tri. - Chennai) Issues:1. Challenge to Order-in-Appeal by Revenue.2. Disallowance of additional trade discount by Assistant Commissioner.3. Appeal by Revenue against Commissioner's decision.4. Inclusion of additional discount in assessable value.Issue 1: Challenge to Order-in-Appeal by RevenueThe Revenue appealed against Order-in-Appeal No. 445/2003/Pondicherry, which was passed by the Commissioner of Central Excise (Appeals), Chennai. The Commissioner had allowed the appeal filed by the assessee-respondents against the original order issued by the Assistant Commissioner, Pondicherry.Issue 2: Disallowance of additional trade discount by Assistant CommissionerThe case involved M/s. Nilkamal Plastics, Pondicherry, engaged in manufacturing plastic furniture and crates. The Assistant Commissioner proposed to disallow an additional trade discount given by the assessee to customers, alleging it was compensation for damages suffered post-clearance. This led to a differential demand of duty and imposition of penalties, which was challenged by the respondents.Issue 3: Appeal by Revenue against Commissioner's decisionThe Revenue contended that the additional discount given by the assessee was akin to damages discount, citing judgments by the Hon'ble Apex Court. The Revenue argued that the Commissioner (Appeals) overlooked these judgments and sought allowance of the appeal.Issue 4: Inclusion of additional discount in assessable valueThe key issue was whether the additional discount given by the assessee to customers, in exchange for not accepting any claims on damaged goods, should be included in the assessable value. The Tribunal analyzed relevant judgments by the Hon'ble Apex Court, emphasizing that the nature of the discount and its relation to damaged goods were crucial in determining its inclusion in the assessable value.The Tribunal noted that the Supreme Court rulings cited by the Revenue dealt with situations where discounts were given for defective goods returned in previous transactions. In contrast, the discount in the present case was offered at the time of sale, irrespective of the nature or extent of potential defects in the goods. The Tribunal highlighted the applicability of the Transaction value method, allowing all types of discounts without restrictions, as clarified by the CBEC circular.Furthermore, the Tribunal emphasized that clarifications issued by the Department, as per the settled law by the Hon'ble Supreme Court, are binding on departmental authorities. In this context, the Tribunal upheld the lower appellate authority's decision, citing the binding nature of the circular and rejecting the Revenue's appeal. The decision was pronounced on 21-5-2004, maintaining the order of the lower appellate authority.