Cash discount and CENVAT credit principles affirmed where discount was documented and duty-paid goods were actually received and used.

Cash discount known at or before clearance and supported by contemporaneous credit notes was deductible from assessable value, because it formed part of the sale arrangement and was shown to have been passed on to buyers. CENVAT credit on goods received from the assessee's own unit could not be denied where duty had actually been paid, the goods were received, and they were used in the recipient unit; the supplier's alleged lack of duty liability was not, by itself, a ground to refuse credit. The assessee succeeded on both valuation and credit issues, and the impugned orders were set aside with consequential relief.

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Issues: (i) whether cash discount shown in the invoices and supported by credit notes was deductible from the assessable value; (ii) whether CENVAT credit on duty paid goods received from the assessee's own unit could be denied merely because that unit was said to be not required to pay duty.

Issue (i): whether cash discount shown in the invoices and supported by credit notes was deductible from the assessable value.

Analysis: The discount was contracted between the assessee and its buyers and was known at or prior to clearance of the goods. Credit notes were produced before the first appellate authority, showing that the discount had in fact been passed on. Once the discount is established as part of the sale arrangement and supported by contemporaneous evidence, it is allowable in valuation.

Conclusion: The assessee was entitled to deduction of cash discount from the assessable value.

Issue (ii): whether CENVAT credit on duty paid goods received from the assessee's own unit could be denied merely because that unit was said to be not required to pay duty.

Analysis: There was no dispute about receipt of the goods, payment of duty by the supplying unit, or use of those goods in the receiving unit. Where duty has been discharged on the goods and the recipient has actually received them, credit cannot be denied merely on the ground that the supplier allegedly ought not to have paid duty.

Conclusion: The denial of CENVAT credit was unsustainable and the assessee was entitled to the credit.

Final Conclusion: Both the valuation dispute and the credit dispute were decided in favour of the assessee, and the impugned orders were set aside with consequential relief.

Ratio Decidendi: Where cash discount is known before clearance and is supported by contemporaneous evidence, it reduces the assessable value; and where duty has been paid on goods actually received and used, CENVAT credit cannot be denied to the recipient merely because the supplier was allegedly not obliged to pay that duty.

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