12.5% Excise to be levied on base price or discounted price

[Asked by Guest]

Dear Sirs,

I am a distributor for a multinational company Construction chemicals, They have various manufacturing locations in India

In their invoice for example the basic value of a material is 2000 rupees and they are giving a discount of 50%

how much excise they should charge

12.5% on 2000 (Basic price)

or 12.5% on 1000 (Discounted Price)

please share your feedback and any supported links or documents

Thanking you

[email protected]

[KASTURI SETHI]

Discount from transaction value should be reasonable and genuine. No additional consideration directly or indirectly (or in some guise). Discount should be passed on to the independent buyers. No sale to related person. Go through Board's Circular No. 979/3/2014-CX., dated 15-1-2014 before arriving at final decision. these are the precautions to be taken. CE duty can be paid on the discounted price but subject to above conditions.

Thank you for very immediate reply sir,

Actually the company is not selling at prices less than manufacturing prices, They provide different discounts based on volume of the order

My question is 12.5% to be calculated on basic price or discounted price

[KASTURI SETHI]

On discounted price (Net Price). But I shall use the term, 'Transaction Value'. Duty is chargeable on the net price paid or payable in terms of Section 4 of the Central Excise Act. What I think 50% discount is too much whatever the factors may be. You will make some base with documentary evidence regarding discounted price on which duty will be paid. After perusing my earlier reply and going through the Board's circular based on the judgement of the Apex Court, every aspect must be clear to you.

[Mahir S]

Excise duty shall be payable on the discounted price that is arrived after allowing for discount on the base price.

[YAGAY and SUN]

In the case of CCE, Indore vs Bridgestone India Pvt Ltd.= 2015 (9) TMI 981 - CESTAT NEW DELHI the assessee was selling the goods through its dealers and C&F agents and was giving quantity discount / trade discount / cash discount to its dealers through credit notes at the end of year. The assessee applied the excise department for provisional assessment but the application was rejected by the department. At the time of clearance of goods from the factory, the assessee paid the excise duty on the sale price (without deducting the discount amount) and filed a refund claim of excess excise duty paid on the finalization of the discount amount.The Tribunal allowed the deduction of different discounts given by the assessee to its dealers from the transaction value. The Tribunal relied on the Supreme Court judgments in the case of Bombay Tyre International and Madras Rubber Factory and held that where the discount policy and its basis is known prior to the clearance of goods from the factory, the deduction of the same is allowed while arriving at the transaction value for payment of excise duty. Even refund of excise duty shall be allowed in cases where the deduction of discount is not claimed from transaction value but the policy and its basis is known to the buyer at the time of removal of goods from the factory.

[KASTURI SETHI]

M/s.YAGAY AND SUN,

Thanks a lot for reference of judgements, Sirs. On the basis of the judgements referred by you, the following judgement of the Apext Court is also relevant:-

2015 (323) E.L.T. 227 (S.C.) = 2015 (8) TMI 1014 - SUPREME COURT

IN THE SUPREME COURT OF INDIA

A.K. Sikri and Rohinton Fali Nariman, JJ.

PUROLATOR INDIA LTD.

Versus

COMMISSIONER OF CENTRAL EXCISE, DELHI-III

Civil Appeal No. 1959 of 2006, decided on 25-8-2015

Thanks a lot everyone for immediate and appropriate responses

Thank you

[Ganeshan Kalyani]

Nice discussion. It enriched my knowledge.

AI Summary

Transaction value: excise duty payable on net price after genuine discounts, subject to documentation and eligibility.
Excise duty is assessable on the transaction value-the net price after legitimate discounts-if discounts are genuine, documented, passed to independent buyers, not to related parties, and where the discount policy and basis are known prior to removal; duty paid on a higher price may be refunded when discount entitlement later crystallises, consistent with Board guidance and judicial precedents.