2013 (3) TMI 450 - AT - Central Excise

Tribunal permits trade discounts in excise duty calculations, ruling in favor of Appellant

The Tribunal ruled in favor of the Appellant in a dispute over the admissibility of trade discounts under the Central Excise Tariff Act. The Tribunal held ... Valuation - Trad Discount - Appellant manufacture cotton & acrylic yarn which is chargeable to excise duty. He claimed the deductions on trade discounts which he provides to the customers at the time of sale, which are in terms of the provisions of Section 4, permissible to those deductions, when at the time of clearance they passed to the buyers. - Department contested the deduction on the basis that there is no evidence that the discounts whose deduction was claimed, had been passed on to the customers at the time of clearances. Held that:- In the instant case, the dispute is not regarding admissibility of discounts but regarding payment of duty on the price charged by the Appellant at the time of clearance of the goods. Therefore, for permitting the deduction of trade discount, what is material is that it should be known and clearly understood prior to or at the time of removal and it is not necessary that it should be quantified and given to the buyer only at the time of removal. Thus the Department’s contention is that while the trade discounts claimed are admissible the deduction from assessable value is not permissible, as the discounts were not passed on to buyers at the time of clearance but later on by issue of credit notes. - Decided in favor of assessee. Issues:Admissibility of trade discounts under Central Excise Tariff Act for cotton and acrylic yarn for 1999-2000 and 2000-2001.Detailed Analysis:1. Issue of Trade Discounts:- The Appellant, engaged in manufacturing cotton and acrylic yarn, faced a dispute regarding the admissibility of trade discounts under the Central Excise Tariff Act.- The Department alleged that the Appellant deducted trade discounts from the assessable value but did not pass them on to customers at the time of clearance, instead issuing credit notes later.- The show cause notice claimed recovery of allegedly short paid duty and imposed penalties based on this discrepancy.2. Adjudication and Appeals:- The Assistant Commissioner upheld the duty demand and penalty, stating that the discounts claimed were not proven to have been passed on to customers at the time of clearance.- The decision was affirmed by the CCE (Appeals) who emphasized that discounts were not given to buyers at the time of clearance and full price was charged.- The Appellant then filed an appeal against this order.3. Arguments Presented:- The Appellant's counsel argued that trade discounts were known at the time of clearance, mentioned in invoices, and later passed on to customers through credit notes.- Cited the Apex Court's judgment emphasizing that trade discounts should be permitted if known at or before removal of goods, irrespective of when they are payable.- Contended that the Department was aware of the discount practice, and the extended limitation period under Section 11A(1) did not apply.4. Department's Defense:- The Senior DR defended the impugned order, asserting that the Appellant did not provide evidence that discounts were passed on to buyers at the time of clearance.- Stressed that duty was paid on discounted prices and that the deduction of discounts was inadmissible if not passed on at the time of sale.5. Judgment and Analysis:- The Tribunal analyzed the dispute over the admissibility of trade discounts, focusing on whether discounts needed to be passed on to buyers at the time of clearance.- Referred to the Apex Court's ruling that trade discounts should be allowed if known at or prior to removal of goods, regardless of when they are payable.- Concluded that the Department's contention that discounts must be passed on at the time of clearance was contrary to legal precedent.- Set aside the impugned order, allowing the appeal and ruling in favor of the Appellant.This detailed analysis highlights the legal nuances surrounding the admissibility of trade discounts under the Central Excise Tariff Act, emphasizing the importance of when discounts need to be passed on to buyers for deduction from assessable value. The judgment clarifies the legal principles governing trade discounts and their treatment in excise duty calculations, ultimately favoring the Appellant's position in this case.