2010 (7) TMI 363 - AT - Central Excise

Tribunal clarifies eligibility for turnover discount deductions in Central Excise Duty case

The Tribunal set aside the duty demands disallowing turnover discount deductions in a Central Excise Duty assessment case involving manufacturers of ... Valuation – Turnover discount – Depot sale - deduction of turnover discount cannot be disallowed as there no legal provision for imposing the condition that for permitting the deduction of trade discount, the same has to be passed on to the buyers at the time of sale - turnover discounts were actually passed on to the buyers has neither been discussed in the order-in-original nor in the impugned order-in-appeal - order set aside and the matter remanded to the original Adjudicating Authority for de novo adjudication of this matter Issues:1. Admissibility of turnover discount deduction in Central Excise Duty assessment.Analysis:The case involved manufacturers of piston/rings subject to Central Excise Duty under Chapter 84 of the Central Excise Tariff. The manufacturers cleared goods to their depots, where prices were determined, and duty was paid at clearance from the factory. The manufacturers claimed turnover discounts to customers finalized at year-end, deducted on a provisional basis during duty payment. The Assistant Commissioner disallowed the claimed turnover discounts, leading to duty demands. The Commissioner (Appeals) set aside the duty demands, prompting the Revenue to file appeals. The main issue was whether turnover discount deduction was permissible without evidence of passing it on to customers.The Departmental Representative argued that turnover discounts not given at the time of sale were inadmissible for deduction, citing legal precedents. The Counsel for the respondent contended that turnover discounts, quantified at year-end, should be deductible as they were known and understood at the time of goods removal. The Tribunal's previous judgment supported the admissibility of turnover discount deductions. The Tribunal analyzed the legal position, considering the Supreme Court's ruling on trade discounts and the absence of a provision disallowing trade discount deductions. The Tribunal noted that the Department did not dispute the general deduction of trade discounts. However, it required evidence that turnover discounts were actually passed on to buyers for deduction eligibility.The Tribunal emphasized the Supreme Court's stance on turnover discounts, permitting deductions even if quantified later. While acknowledging the permissibility of trade discount deductions, the Tribunal stressed the necessity of evidence showing the actual passing on of turnover discounts to buyers. As such evidence was lacking in the case, the Tribunal set aside the impugned order and remanded the matter for fresh adjudication. The Adjudicating Authority was instructed to allow turnover discount deductions only to the extent they were proven to have been passed on to buyers, requiring the respondents to provide supporting evidence.In conclusion, the Tribunal's decision clarified the admissibility of turnover discount deductions in Central Excise Duty assessments, emphasizing the need for evidence of passing on such discounts to buyers for deduction eligibility. The case was remanded for further examination based on these principles.Judgment:The Tribunal set aside the impugned order and remanded the case to the Adjudicating Authority for fresh adjudication, requiring evidence of turnover discount passing on to buyers for deduction eligibility.