2015 (9) TMI 460 - AT - Central Excise

Tribunal allows discount deductions on removal if passed to buyers. Unjust enrichment doesn't apply to excess duty refunds.

The Tribunal affirmed the decision to allow discount deductions if known at the time of removal and passed on to buyers. It held that unjust enrichment ... Refund of excess duty - Valuation - deduction of various types of discounts from the assessable value - manufacture of cold rolled Steel Strips/Sheets and Galvanized Plain and corrugated sheets. - Held that:- In any case we find that the Revenue is not disputing the factum of giving of discounts to the customers. The discount policy also was available and was known to the customers at the time of clearance of their final product. The discounts stand actually given when a particular customer attains that goal of quantum of purchase. In such a scenario the Revenue cannot question the assessee, as to why, the discounts stand given to a particular customer. It may not be out of place to mention here that Revenue is not disputing the factum of grant of discount. Even though, the certificates were given subsequently, they related to the relevant period. It is also not being disputed that discount policy was floated by the assessee amongst their customers. As such, non-uploading of the same at the website would not make a difference. Otherwise also, we find that the Tribunal in the remand proceedings has held such discounts to be admissible and does not open to the Revenue to challenge the same in the remand proceedings. Revenue in their memo of appeal have submitted that as the appellant had originally recovered the duty amount from their customers, who might have taken the credit, the provisions of unjust enrichment would apply. They have further pleaded that inasmuch as the discount is always relatable to the value and not to the duty, the recovery of the entire duty from the customers and the grant of refund to the assessee would amount to unjust enrichment of the assessee. We find that the assessee’s customers have taken a categorical stand and have also produced certificates before Commissioner (Appeals) that they are not registered with the Central Excise Department and as such, the question of availing the credit does not arise. If the discounts are given, the value would be lowered resulting in assessees’ liability to pay reduced duty in which case, if assessee has paid back the excess duty to the customers, he would be entitled to the refund of the same. - Refund allowed. - Decided against the revenue. Issues Involved:1. Deduction of various types of discounts from the assessable value.2. Application of the principle of unjust enrichment.3. Verification of documentary evidence for the refund claim.Detailed Analysis of the Judgment:1. Deduction of Various Types of Discounts from the Assessable Value:The core dispute revolves around whether the cash discounts, quantity discounts, and other trade discounts were known at the time of removal of goods. The Tribunal considered two scenarios: if the discounts were retrospective and not known at the time of removal, the Apex Court's judgment in MRF v. CCE, Madras would apply, denying the deductions. Conversely, if the discounts were known but quantified later, the judgment in Union of India v. MRF would apply, allowing the deductions. The Commissioner (Appeals) found that the discount policies were known to the customers at the time of clearance, and thus, the deductions should be allowed. The Tribunal remanded the matter to the Original Adjudicating Authority for verification of whether the discounts were known at the time of removal and actually passed on to the buyers.2. Application of the Principle of Unjust Enrichment:The Tribunal examined whether the excess duties paid and subsequently refunded to the customers via credit notes would invoke the principle of unjust enrichment. The Commissioner (Appeals) held that the provisions of unjust enrichment would not apply if the excess duty was not retained by the appellant but refunded to the customers. This position was supported by precedents from the Karnataka High Court, which ruled that if the duty was repaid to the customers, the incidence of duty was not passed on, thus entitling the assessee to a refund.3. Verification of Documentary Evidence for the Refund Claim:The Commissioner (Appeals) remanded the case for verification of documentary evidence to ensure that the discounts were actually passed on to the buyers. The Tribunal upheld this remand, emphasizing the need for the Original Adjudicating Authority to verify the credit notes and relevant accounting ledgers to ascertain that the burden of duty was not passed on to the customers. The Tribunal also clarified that the legal issues concerning unjust enrichment were subject to this verification process.Conclusion:The Tribunal disposed of the Revenue's appeals by affirming the Commissioner (Appeals)'s decision to allow discount deductions if they were known at the time of removal and actually passed on to the buyers. The Tribunal also upheld the view that the principle of unjust enrichment would not apply if the excess duty was refunded to the customers. The matter was remanded to the Original Adjudicating Authority for verification of the documentary evidence to confirm the actual passing of discounts and the correct quantum of refund.