Custom, Excise & Service Tax Tribunal
Glenmark Pharmaceuticals Ltd vs Commissioner Of Central Excise on 11 May, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. E/6159/04 Mum
(Arising out of Order-in-Appeal No. CEX-XI/JMJ/366/916/NSK/ APL/2004 dated 09.09.2004 passed by the Commissioner of Central Excise (Appeal) Nasik)
For approval and signature:
Honble Shri Rakesh Kumar, Member (Technical)
Honble Shri Ashok Jindal, Member (Judicial)
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
Glenmark Pharmaceuticals Ltd.
Appellant
Vs
Commissioner of Central Excise,
Respondent
Nasik Appearance Ms. Anjali Hirawat, Advocate with for Appellant Shri Bharat Raichandani, Advocate Shri S.S. Katiyar, SDR for Respondents CORAM:
Shri Rakesh Kumar, Member (Technical) Shri Ashok Jindal, Member (Judicial) Date of Hearing : 11.05.2011 Date of Decision : 11.05.2011 ORDER NO. Per Rakesh Kumar The facts giving rise to this appeal are in brief as under.
2. The appellants are engaged in the manufacture of pharmaceutical products chargeable to Central Excise duty under Chapter 30 of the Central Excise Tariff Act, 1985. The period of dispute in this case is from August 2001 to March 2002. The appellant clear the goods to a warehouse at Bhiwandi from where the goods are sent to their stockiest for sale. The goods during the period of dispute were cleared from the factory on payment of duty on the value as per the provisions of Section 4 of Central Excise Act, 1944. According to the appellant during the period of dispute they were giving quantity discounts as declared in their price circulars / price lists and as per the quantity discount policy the buyers were being given quantity discount in form of free quantity i.e. certain quantity of goods free, based on the quantity purchased by them. In other words the appellants were giving quantity discount by charging for the quantity lesser than the quantity actually supplied to the customers. Since at the time of clearance of the goods from the factory, the duty had been paid on full quantity of the goods cleared without taking into account the quantity discount, the appellant submitted a refund claim for the excise duty amounting to Rs.20,92,683/- paid by them. The refund claim was rejected by the jurisdictional Asst. Commissioner vide order-in-original dated 29.7.03 on the ground that the quantity discount was not known at the time of clearance of the goods as the same had not been mentioned in the invoices under which the goods had been cleared. While rejecting the refund claim on this ground, the Asst. Commissioner also observed that the appellant have not submitted excise invoice-wise details co-relating the depot-wise/location-wise invoices issued by them to arrive at the duty involved in goods supplied free as quantity discount, which has been claimed as refund. On appeal to Commissioner (Appeals), the Commissioner (Appeals) vide order-in-appeal dated 09.09.04 dismissed the appeal observing that the appellant have not produced detailed chart showing co-relation of the sale through depots with the excise invoices issued at the time of clearance from the factory and that the appellant has shown free quantity in the depot sale invoices, but nowhere it is mentioned that the same is according to the quantity discount scheme offered by them and it is, therefore, difficult to ascertain whether free quantity mentioned in the depot invoices is under the quantity discount scheme. Against the order of Commissioner (Appeals) the present appeal has been filed.
3. Heard both sides.
4. Shri Bharat Raichandani and Ms. Anjali Hirawat, Advocates, the learned Counsels for the appellant pleaded that since the quantity discount depends upon the quantity purchased by a buyer from the depot, the same cannot be mentioned in the excise invoices issued at the time of clearance of the goods from the factory, that the quantity discounts have been offered under quantity discount scheme announced by the appellant from time to time, that the quantity discount wherever mentioned in the depot invoices has actually been passed on the buyers, that for permitting the deduction of quantity discount, it is not necessary that the same must be mentioned in the Central Excise invoices, that in this regard they rely upon the Judgement of the Tribunal in the case of CCE vs. Goetze (India) Ltd. 2011 (263) ELT 477 (T) wherein relying upon the Honble Supreme Courts judgement in the case of Union of India vs. Madras Rubber Factory 1995 (77) ELT 433 (S.C.) the Tribunal has held that deduction towards turnover discount for determining assessable value is permissible even if the same is quantified on half yearly basis, that the Tribunal in the case of Swastik Fragrances vs. CCE 2000 (121) ELT 375 has held that there is no legal requirement that the assessee should disclose to the department the existence of a scheme before its launch or during the currency of the scheme and all that is required is that the discounts claimed should be known to and understood by the dealers/customers at the time of removal of the goods, that the Honble Bombay High Court in the case of Goodlass Nerolac Paints Ltd. vs. UOI 1993 (65) ELT 186 (Bom.) has held that deduction of quantity discount on free supply under quantity discount scheme well known in advance, is permissible even though the quantity of discount and quantity of free supply is known only at the end of the scheme, that Rule 7 of the Central Excise Rules, 2000 makes it clear that when the goods manufactured are sold from depot, the price at which goods are sold from depot shall be the value for the purpose of levying excise duty on goods and all admissible deductions have to be given on this value, that in view of this, when ex-depot price is available, the condition that the discount should be known prior to the removal of goods can be satisfied only at depot and the department cannot insist that the quantity discount should be mentioned in the Central Excise invoices issued at the time of clearance of the goods from the factory, that the quantity discount has been shown in the invoices issued from the depots and the same was in accordance with the appellants discount policy, that since no price including duty has been charged for the quantity supplied free as quantity discount, while duty has been paid on the entire quantity cleared from the factory, the refund claim is not hit by bar of unjust enrichment, that detailed chart showing batch-wise payment of duty at the factory and batch-wise and invoice-wise free quantity supplied along with excise duty on such free quantity had been submitted before the Asst. Commissioner, but the adjudicating authority never called for information on the co-relation aspect which would have been submitted if asked for and that in view of the above, the impugned order is not correct.
5. Shri S.S. Katiyar, learned SDR defended the impugned order by reiterating the findings of the Commissioner (Appeals) in the impugned order and pleaded that during post July 2000 period, the discount has to be shown on the body of the Central Excise invoices which has not done in the case, that co-relation of the goods cleared on payment of duty from the factory gate and the goods sold from the depot free of charge as quantity discount has not been made, that the appellant has also not explained as to how their refund claim is not hit by bar of unjust enrichment and that in view of the above, there is no infirmity in the impugned order.
6. We have carefully considered the submissions from both the sides and perused the records.
7. During the period of dispute, the appellant had given quantity discount to their customers as per their quantity discount schemes and as per these quantity discount schemes, on buying certain quantity of goods, certain quantity of goods was offered free or in other words price charged was for quantity lesser than the quantity actually supplied, which has the effect of reducing the net sale price. The main contention of the department is that the deduction of quantity discount cannot be allowed, as the same was not mentioned in the Central Excise invoices issued at the time of clearance from the factory. This plea of the department is not correct as when the goods are first stock transferred from the factory to the depot on payment of duty and are sold from the depot the quantity discount cannot be mentioned in the Central Excise invoices issued at the time of clearance of the goods from the factory. The Honble Supreme Court in the case of UOI vs. Madras Rubber Factory (supra) while interpreting the provisions of Section 4 of the Central Excise Act, 1944, as it stood during the period prior to 1.7.2000 and in which there was a specific provision for deduction of trade discounts from the assessable value, has held that the deduction of trade discounts known and understood at the time of removal of goods is permissible even if the same are quantified later and in para 58 and 60 of the judgement with regard to turnover discount has held that though the turnover discount is determined on half yearly basis depending upon the volume of purchases made by the dealers, its deductions is permissible as it is known and understood at the time of removal of the goods, though it is quantified later. Though the new Section 4 with effect from 1.7.2000 in which the assessable value is the transaction value of the goods, does not has a specific provision for deduction of trade discounts, the concept of transaction value, by its very nature would include the deduction of trade discount and, therefore, the judgement of Honble Supreme Court in the case of Union of India v. Madras Rubber Factory (supra) would be applicable. The same view with regard to turnover discount has been taken over by this Tribunal relying upon the above mentioned judgement of the Honble Supreme Court in the case of Commissioner of Central Excise vs. Goetze (India) Ltd. (supra). In view of this, if in this case during the period of dispute there were quantity discount schemes and the quantity discounts in the form of free quantity were given at the time of sale from depot, the same would have to be allowed, even if Central Excise invoices issued at the time of clearance of the goods from the factory do not mention the quantity discount, as the same can be mentioned only when the goods are sold from the depot. For permitting the deduction of quantity discount, what should be known and understood prior to sale is the quantity discount scheme or policy and not the exact quantum of quantity discount available to a buyer based on the discount scheme, which would be known only at the time of sale or at the end of the period specified in the discount scheme of the quantity discount is based on the quantity purchased by a buyer during a specified period. The impugned order is, therefore, not sustainable. The same is set aside. The matter is remanded to the original adjudicating authority for denovo adjudication in accordance with the ratio of judgement of the Honble Supreme Court in the case of UOI v. Madras Rubber Factory (supra). The original adjudicating authority must determine as to whether during the period of dispute there was quantity discount policy announced by the appellant and whether the discounts given to their customers in respect of sale are in accordance with the discount policy. He should also consider the aspect of unjust enrichment which would be applicable if in respect of free supply quantity, duty had been recovered from the customers. The appellants plea that the free quantity as mentioned in the depot invoices had been cleared on payment of duty under the Central Excise invoices issued at the time of clearance from the factory may also be considered. The appeal stand disposed of as above.
(Dictated in open Court) (Ashok Jindal) Member (Judicial) (Rakesh Kumar) Member (Technical) nsk 2