2000 (12) TMI 188 - AT - Central Excise

Tribunal allows various deductions, excluding depot-to-depot transportation costs.

The Tribunal allowed deductions for cash discount, interest on receivables, special discount, cost of transportation from depots to buyers, cost of ... Valuation (Central Excise) Issues Involved:1. Cash discount2. Interest on receivables3. Special discount4. Cost of transportation5. Cost of packing in wooden boxes6. Excess realization on account of freightDetailed Analysis:1. Cash Discount:The appellants claimed a cash discount of 1.5% before 1-4-1984 and 2.1% after 1-4-1984, which was limited by authorities to the extent actually availed by buyers. The appellants argued that the discount should be allowed irrespective of whether buyers availed it or not, citing various judgments supporting this view. The Tribunal agreed, stating that the law has been settled in favor of the assessee by multiple decisions, including the latest in Anil Starch Products Ltd. v. C.C.E. The Tribunal distinguished opposing decisions and concluded that cash discount is an admissible deduction if it is known at the time of clearance and available to all buyers who meet the discount conditions.2. Interest on Receivables:The Assistant Collector disallowed the deduction for interest on receivables based on a recalled Supreme Court judgment. However, the Tribunal noted that the Supreme Court had reaffirmed this deduction in 1995 (77) E.L.T. 433. The appellants cited additional supporting judgments. The Tribunal accepted the appellants' claim, noting that the issue is well-settled.3. Special Discount:The special discount of 6% for the period 1987-88 was disallowed by authorities due to unclear reasons behind the price reduction. The appellants argued that the discount was due to stock accumulation and met trade discount criteria. The Tribunal agreed, referencing Supreme Court judgments that such trade discounts are admissible deductions.4. Cost of Transportation:The authorities allowed freight charges only up to the first destination from the factory, disallowing charges from depots to buyers' places. The appellants did not press for deductions for depot-to-depot transportation but claimed deductions for delivery from depots to buyers. The Tribunal allowed this deduction, citing supporting judgments from the Bombay High Court and Supreme Court.5. Cost of Packing in Wooden Boxes:The appellants argued that the cost of wooden boxes used for transportation safety should not be included in the assessable value. They cited several judgments supporting this view. The Tribunal agreed, noting that the department did not argue that wooden box packing was essential for marketability. The Tribunal concluded that secondary packing costs are not included in the product value.6. Excess Realization on Account of Freight:The department sought to add the difference in cases where the appellants charged more for transportation than the actual expenses. Both sides agreed that the issue is covered by the Supreme Court's decision in Baroda Electric Meters Ltd. The Tribunal allowed the appeal, stating that excess freight charges are not part of the manufacturing cost and assessable value.Separate Judgments:There was a difference of opinion between the Hon'ble Member (J) and the Vice President regarding the cash discount issue. The Vice President suggested referring the matter to a Larger Bench due to differing views between Tribunal benches and High Court judgments. However, the Third Member, Dr. S.N. Busi, agreed with Member (J) that cash discount is an admissible deduction based on settled legal positions, including a Supreme Court judgment.Final Order:The majority decision allowed deductions for cash discount, interest on receivables, special discount, cost of transportation from depots to buyers, cost of packing, and excess realization on account of freight. However, deductions for transportation costs from depot to depot were not allowed.