2011 (5) TMI 773 - AT - Central Excise

Tribunal upholds deductions for post-manufacturing expenses in favor of respondents.

The Tribunal upheld the lower authorities' orders, rejecting the Revenue's appeal. The deductions for post manufacturing expenses, including Trade ... Post-manufacturing expenses - trade discount and additional discount - transportation and transit insurance exclusion from assessable value - equalised/average basis deduction - chartered accountant certificate as admissible evidentiary foundation - onus of proof on the assessee to establish that discount was passed on - verification by Range OfficerPost-manufacturing expenses - trade discount and additional discount - chartered accountant certificate as admissible evidentiary foundation - Deduction of trade discount and additional discount as post-manufacturing expenses was allowable on the basis of the Chartered Accountant certificate and corroborative verification. - HELD THAT: - Both lower authorities allowed deductions for trade and additional discounts after considering the Chartered Accountant certificate and verification by the Range Officer. The tribunal applied the principle that the assessee bears the onus to show that discounts were passed on, and held that the assessee discharged that onus by filing the Chartered Accountant certificate and documentary evidence showing discounts were regularly passed to distributors. The Revenue produced no corroborative evidence to impeach the certificate or the Range Officer's verification; in the absence of such evidence the claim could not be rejected. [Paras 4, 5]Claim for trade and additional discounts allowed; impugned orders upholding the deductions are sustained.Transportation and transit insurance exclusion from assessable value - equalised/average basis deduction - verification by Range Officer - Exclusion of transportation and transit insurance from assessable value on an equalised/average basis was permissible where costs could not be segregated and were verified by the Range Officer. - HELD THAT: - The adjudicating authorities followed principles that when sale price at depots is the normal price, expenses from factory to place of removal (including freight and transit insurance) form part of sale price; however, where a composite insurance/transport arrangement prevents segregation of costs, an equalised or average apportionment certified by a Chartered Accountant and verified by the Range Officer may be accepted. The respondents furnished a composite mega turnover insurance policy and used equalisation because segregation was not possible; the Range Officer's verification found invoices and the methodology in order. Revenue failed to produce evidence to controvert this approach. [Paras 4]Equalised deductions for transportation and insurance accepted; impugned orders upholding such deductions sustained.Chartered accountant certificate as admissible evidentiary foundation - onus of proof on the assessee to establish that discount was passed on - Where the assessee produces a Chartered Accountant certificate certifying deductions and related verification, the Revenue must produce evidence to rebut it; mere allegation is insufficient. - HELD THAT: - The tribunal reiterated that the assessee has the initial burden to establish that discounts, freight and insurance claimed have been passed on or pertain to the declared turnover; filing of a Chartered Accountant certificate together with verification by the Range Officer satisfies this burden. Thereafter, the onus shifts to Revenue to adduce evidence contradicting the certificate or verification. In this case, Revenue did not furnish such evidence and therefore the lower authorities' acceptance of the certificate could not be disturbed. [Paras 5]Chartered Accountant certificate and Range Officer verification treated as sufficient evidence in absence of contrary material; Revenue's appeal rejected on this point.Final Conclusion: The tribunal upheld the lower authorities' allowance of deductions for trade/additional discounts and for transportation and transit insurance on an equalised basis after Chartered Accountant certification and Range Officer verification; the Revenue's appeals are dismissed and the impugned orders are affirmed. Issues: Revenue's appeal against allowance of post manufacturing expenses as deduction for Trade discount, Additional discount, Insurance, and Transportation charges based on Chartered Accountant Certificate.Analysis:1. The case involved the appeal by Revenue against the orders allowing post manufacturing expenses deductions for Trade discount, Additional discount, Insurance, and Transportation charges based on a Chartered Accountant Certificate. The respondents, manufacturers of P & P medicament, claimed these deductions in their price declarations as per Rule 173C of the Central Excise Rules, 1944. Both lower authorities allowed the deductions following guidelines from the Bombay Tyre International case and the certificate's verification by the Range Officer.2. The Revenue contended that the Central Excise (Valuation) Rules, 2000 allow exclusion of transportation costs only if shown separately in the invoice and for the actual cost charged from buyers. The same applied to insurance costs. The Revenue challenged the deduction of trade and additional discounts, citing the absence of provisions post-introduction of transaction value under Section 4 w.e.f. 1-7-2000. The Revenue sought to set aside the lower authorities' orders based on these grounds.3. The Tribunal heard the arguments and examined the records. It noted that the lower authorities had allowed the post manufacturing expenses deductions following the Bombay Tyre International guidelines. The adjudicating authority observed that expenses towards transport, insurance, etc., from the factory to the place of removal form part of the sale price for excise duty levy. The certificates were found in order after verification by the Range Officer.4. The respondents supported their deductions with the Chartered Accountant certificate and Range Officer's verification. The Tribunal referenced a previous case where abatement towards equalized freight was allowed to arrive at the assessable value. The Tribunal held that the onus to prove the discount passing to buyers rested with the assessee, which they fulfilled with the certificates. The Revenue's challenge lacked corroborative evidence and was deemed unsustainable.5. Ultimately, the Tribunal upheld the lower authorities' orders, rejecting the Revenue's appeal. The deductions for post manufacturing expenses were deemed legal and proper based on the Chartered Accountant certificate and verification. The Tribunal found no merit in the Revenue's appeal and no reason to interfere with the impugned orders, thus upholding the decisions in favor of the respondents.