Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs M/S. Texmo Industries on 25 February, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/1053/2005
(Arising out of Order-in-Appeal No. 239/2005-CE dated 06.09.2005, passed by the Commissioner of (Appeals), Coimbatore).
For approval and signature
Honble P. G.CHACKO, Member (Judicial)
Honble P.KARTHIKEYAN,Member (Technical).
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CCE, Coimbatore : Appellant
Vs.
M/s. Texmo Industries : Respondent
Appearance Shri M.K.A.K. Mohiddin, JDR, for the appellant Shri K.S. Venkatagiri, Adv., for the respondent CORAM Honble P.G. CHACKO, Member (Judicial) Honble P.KARTHIKEYAN, Member (Technical) Date of hearing : 25.02.08 Date of decision : 25.02.08 Final ORDER No.________/2008 Per P. KARTHIKEYAN, M (T) This is an appeal filed by the Revenue. Respondent M/s. Texmo Industries, Coimbatore, manufactures and clears different varieties of pumps. The respondent stock transfers the manufactured pumps to its branches paying duty on the list price less 5% discount. However, the dealers were not given discount in the invoices but credit notes were issued for an equivalent amount. The dealers are periodically credited with the 5% of the list price in the commercial invoices monthly or at the end of the year. In the credit notes, the respondents described the discounts as after sales service allowance. When the pumps manufactured were exempt from payment of duty upto 1.3.2002 also the respondents used to describe the 5% amount actually credited to the dealers as after sales service allowance.
2. Notices were issued to the respondent to recover duty on the above 5% amount described as after sales service allowance treating it as additional consideration received by the assessee during the period 1.3.2002 31.01.2004. The original authority dropped the proceedings, finding that the respondents actually passed on the 5% discount to the dealers at the end of every year/month. In the impugned order the Commissioner (Appeals) did not accept the departments plea that by issuing credit note for 5% of the list price, the dealers were actually compensated for selling and distribution expenses in the guise of annual discount with intention to evade payment of duty. He also did not accept the argument that since the amount transferred to dealers through credit note had been recorded as selling and distribution expenses in their Profit and Loss Account it was really towards after sales services incurred by dealers. The appeal before him had proceeded on an assumption that the dealers rendered after sales service on behalf of the respondents without any evidence to show that the dealer had actually incurred any such expenditure. The revenue had no case that the respondents had retained the discount without passing on the same to the dealers. The circular issued by the respondent among the dealers clearly stated that credit note for 5% annual discount given on list price would be issued to dealers along with invoice on daily basis for the days transaction and the amount would be credited on 31st March. The circular had directed the branches that the credit note should be sent to dealers along with the invoices daily. This practice was changed on 1.1.2003 by crediting the discount of 5% to the account of the dealers at the end of the month itself. The Commissioner (Appeals) was satisfied that the respondents did not collect after sales service charge from customers or passed on to the dealers. There was no evidence to show that the dealers had actually incurred any expenses towards any after sales service nor the assessee had an enforceable legal right against the dealers to force them incur on their behalf such expenses to be later on met from the so called discount. It was settled law that discount by what ever name it was called was permissible deduction whether it was given in the invoices or by way of credit notes provided the same was actually passed on. The impugned order was passed on the above findings.
3. In the appeal before us, revenue has found the impugned practice unusual to grant discount. The assessee had not established that they were passing on to the dealers the 5% amount collected through commercial invoices. What was passed on in the instant case was after sales service allowance camouflaged as year end discount. The preponderant probability established the case against the respondent.
4. The Ld. SDR reiterated the grounds of appeal taken by the revenue.
5. The Ld. Counsel for the respondents has relied on the decision of the Tribunal in Mahavir Spinning Mills Ltd., Vs. CCE, reported in 2007 (207) ELT 94 (Tri,.-Del.) and Maruti Udyog Ltd. Vs. CCE Delhi reported in 2004 (170) ELT 245 (Tri.-Del.). In the Mahavir Spinning Mills case, the Tribunal decided that additional discount passed through credit note was admissible. In the said case, the Tribunal found that varying discounts were granted to different classes of buyers on commercial basis and the discount was not refundable on any account. It was well settled that time of granting discount was not relevant for the purpose of determining whether the discount was to be allowed for the purpose of deduction.
6. In the Maruti Udyog Ltd. case (supra), it was decided that pre-delivery inspection and after sales service charges received by dealers from buyers of cars not being payable to or on behalf of manufacturer was not includible in assessable value of cars. It was decided that the post delivery inspection and after sales service did not need to form part of the assessable value of the automobiles while discharging central excise duty. The Ld. Counsel submitted that even if the impugned charges related to after sales service, the same was not required to be included in the assessable value.
7. We have carefully considered the facts of the case. In the Bombay Tyres International(dated 14/15 Nov 1983) case, the Honble Apex Court decided that the discount granted to buyer of excisable goods described by whatever name was not to be included in the assessable value provided that the discount was known at or prior to removal of the goods on sale . Such discount was not to be disallowed only because they were not payable at the time of each invoice or deducted from the invoice. In the instant case, the revenue has not adduced any evidence to establish that the discount in question was not passed on to the dealers of the respondent and was retained by the respondent. There is no evidence also to show that the impugned amount represented compensation for after sales service incurred by the dealers on behalf of Texmo Industries in which case it could be argued that it constituted additional consideration includible in the assessable value. In the circumstances, we find that the discount given was a purely commercial one and admissible for deduction from the list price in determining the assessable value. Accordingly, we uphold the impugned order and reject the revenues appeal as devoid of merit.
(Operative part of the order pronounced in open Court on 25.02.2008)
(P.KARTHIKEYAN) (P.G. CHACKO)
MEMBER (T) MEMBER (J)
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