2005 (8) TMI 166 - AT - Central Excise

Tribunal allows quantity discounts as deduction in assessable value, rules against denial based on communication

The Tribunal held that quantity discount is an eligible deduction from the sale price for determining the assessable value of goods. The denial of the ... Valuation (Central Excise) - Quantity discount Issues:Eligibility of quantity discount as deduction from the sale price while fixing the assessable value.Analysis:The matter was before the Appellate Tribunal on remand by the Hon'ble Supreme Court. The dispute centered around the eligibility of quantity discount as a deduction from the sale price for determining the assessable value. The period in question spanned from February 26, 1990, to December 31, 1995. The contention was that there should be no dispute regarding the eligibility of quantity discount for deduction, as per the Supreme Court's previous rulings. The latest judgment highlighted the permissibility of quantity discount as a deduction in assessing the value of goods, as established in various court decisions.On the facts of the case, it was argued that the denial of the discount by the adjudicating authority was based on the communication of availability of quantity discount to dealers through the appellants, which was deemed invalid. However, the Commissioner (Appeals) found that the 'criterion' and 'norm' for fixing quantity discount were not disclosed. The argument presented was that the discount should have been allowed as a deduction from the sale price, regardless of the mode of communication, as the quantity discount was known at the time of goods removal. It was emphasized that the 'norm' and 'criterion' for granting discounts are commercial decisions of the assessee and need not be disclosed to tax authorities.The learned SDR contended that the criterion for discount was not known, even from the dealers' affidavits, and since no written agreement regarding quantity discount was produced, the appellant failed to satisfy the requirement of discounts being known at the time of goods removal. However, the legal position was clear that quantity discount was an eligible deduction, as established by the Supreme Court. The Tribunal found the original authority's objection to verbal communication of the discount as invalid, especially considering the discount had been allowed previously. The Commissioner (Appeals)' insistence on disclosing 'norm' and 'criterion' for discount was deemed unnecessary, as the assessment should focus on whether a discount was granted, not the reason behind it.In conclusion, the Tribunal held that quantity discount was an eligible deduction, and the orders to the contrary were deemed unsustainable. Therefore, the impugned orders were set aside, and the appeals were allowed.