2007 (9) TMI 180 - AT - Central Excise

Tribunal upholds duty discount abatement and assessable value inclusion for moulds

The Tribunal dismissed the appeal filed by the Revenue challenging the dropping of duty demand on discounts declared in price lists and the proportionate ... Allowability of trade discount/abatement from declared price - commission agent versus buyer distinction for characterization of discount - includibility of cost of customersupplied moulds in assessable value - reliance on Chartered Accountant's certificate as evidence of inclusion in value - timebar/limitation for issuance of showcause noticeAllowability of trade discount/abatement from declared price - commission agent versus buyer distinction for characterization of discount - Whether the discount indicated in the filed price lists was eligible for full abatement although part of that discount was paid to distributors who were not buyers but were assigned territorial distribution. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) finding that the distributors were not commission agents and that the assessee had correctly abated the declared discount for valuation. The Commissioner followed earlier Tribunal decisions which held that where the net realisation to the assessee accords with the filed and approved price list, the entire declared discount is admissible even if a portion is paid to distributors occupying a distribution territory. The pricelist pattern declaring such discounts had been periodically filed with the department, and the showcause notice in respect of clearances prior to April 1994 was held to be timebarred. On these facts and authorities, the Revenue's challenge to this part of the impugned order was not sustainable. [Paras 2]Full declared discount was admissible for abatement; challenge by Revenue dismissed.Includibility of cost of customersupplied moulds in assessable value - reliance on Chartered Accountant's certificate as evidence of inclusion in value - timebar/limitation for issuance of showcause notice - Whether the proportionate cost of moulds supplied free by buyers ought to have been included in the assessable value and whether the Commissioner was justified in dropping proceedings relying on the Chartered Accountant's certificate and limitation. - HELD THAT: - The Tribunal noted that there existed conflicting views on includibility of customersupplied mould cost, but that earlier largerbench and Tribunal decisions have held that the proportionate cost of moulds supplied free by customers is includible in assessable value. The Commissioner accepted a Chartered Accountant's certificate stating that the disputed element had been included in value for most clearances; the Revenue's submission that the Commissioner should have independently verified billing particulars, and that the certificate did not cover certain buyers, was considered against the fact that the showcause notice related to clearances from Sept.'92 to Mar.'94 and was issued in June 1995. Given the settled position in authority, the reliance on the CA certificate in the circumstances, and limitation, the Tribunal held the Commissioner's dropping of proceedings could not be successfully impugned. [Paras 3, 4, 5]Proceedings as to mouldcost inclusion were properly dropped; Revenue's challenge dismissed.Final Conclusion: The appeal filed by the Revenue is dismissed and the impugned order of the Commissioner (Appeals) dropping the demand is sustained. Issues:1. Challenge to dropping demand of duty on discount declared in price lists.2. Challenge to dropping demand of duty on proportionate cost of moulds received.Analysis:1. The first issue in this case revolves around the challenge to dropping the demand of duty on the discount declared in the price lists. The appeal filed by the Revenue questions the legality of the impugned order of the Commissioner (Appeals) in dropping the demand. The grounds stated in the appeal argue that the distributor, not being the buyer of the goods, was a commission agent, and hence, the discount received should be considered as commission and not eligible for abatement from the list price. However, the Commissioner based the decision on various judicial authorities, such as Electrical Products Corporation case and Hari Chand Shri Gopal case, emphasizing that as long as the price charged was less the declared discount, the entire discount was eligible for abatement. The Commissioner found that the distributors in this case were not commission agents, and thus, the discount was correctly abated for the purpose of duty payment. The Tribunal also noted that the pattern of discount was declared in the price lists filed by the respondents with the department periodically, and the demand for short levy was hit by limitation, making the challenge unsustainable.2. The second issue concerns the challenge to dropping the demand of duty on the proportionate cost of moulds received by the assessee. The Commissioner accepted the Chartered Accountant's certificate stating that the impugned element had been included in the assessable value. However, the appeal argued that the Commissioner should have verified whether the billing price included the amortized cost of the moulds and that the certificate did not cover certain clearances. The respondents, in their cross-objection, highlighted that the demand was time-barred as the Revenue had not proven that relevant information was suppressed with intent to evade duty payment. They also pointed out conflicting views on the includibility of the cost of moulds in the value of finished goods. The Tribunal supported the respondents' view, citing decisions in Bright Brothers Ltd. case, KK Nag Ltd. case, and CCE vs. I.T.W. Signode (India) Ltd. case. The Larger Bench decision in Mutual Industries Ltd. case also confirmed that the proportionate cost of moulds should be included in the assessable value of the goods.In conclusion, the Tribunal dismissed the appeal filed by the Revenue and upheld the impugned order, emphasizing that the settled position on both issues supported the decision of the Commissioner.