Indian Kanoon - Search engine for Indian Law

Custom, Excise & Service Tax Tribunal

Gaurav Agro Plast Ltd vs C.C.E.& S.Tax, Vapi on 20 January, 2017

        

 
	 
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Zonal Bench, O-20, NMH Compound
Ahmedabad

Central Excise Appeal No.225  227 of 2007- DB
 
Arising out of the Order-in-Original No.40/DEM/VAPI/2006 dated 13.12.2006 passed by the Commissioner, Central Excise & Service Tax, Vapi.
					 	 
Gaurav Agro Plast Ltd.					 ..	Appellants
Shri Nanik Madnani
Shri Kishor Singh Solanki
 
Vs. 

C.C.E.& S.Tax, Vapi				 ..     Respondent

Appearance:

Present Shri J. Surti, Advocater for the appellants Present Shri Alok Srivastava, A.R. for the Respondent-Revenue Coram: Honble Dr. D.M. Misra, Member (Judicial) Honble Mr. Ashok K. Arya, Member (Technical) Date of hearing: 18.1.2017 Date of pronouncement :29.1. 2017 Final Order No.10136  10138/2017 Per: Dr. D.M. Misra These three appeals are filed against the OIO No.40/DEM/VAPI/ 2006, dt.13.12.2006, passed by Commissioner, C.Ex. & S.Tax, Vapi.

2. Briefly stated, the facts of the case are that the Appellants are engaged in the manufacture of Plastic Moulded Furniture falling under Chapter 9403.00 of Central Excise Tariff Act, 1985. During the relevant period i.e. 1998-99 to 2002-03, the Appellants had filed Price Lists under the relevant Rules and claimed various discounts viz. cash discount, turnover discount, quantity discount, year ending discount, trade discount etc.; also claimed deduction on outward freight and special packing charges from their selling price in determining the assessable value. The goods were cleared under excise invoices by claiming above deductions from the price and duty was discharged on the assessable value, accordingly. However, commercial invoices were also issued reflecting the selling price without showing deductions. At the end of the financial year, on the basis of actual discounts passed on to the customers, the assessable value was re-determined and differential duty had been paid.

2.1 On a visit by the range officers to the factory premises of the Appellant, it was noticed that the discounts claimed by the Appellant had not been entirely passed on to the customers, involving duty of Rs.27,79,839/- for the period prior to 01.07.2000 and Rs. 3,00,058/- for the period after 01.07.2000; similarly , deductions claimed by the Appellant on account of special packing and freight charges involving duty of Rs.7,04,116.78, Rs.20,45,559/-, respectively were not admissible to them, but claimed wrongly. Consequently, a demand notice was issued to the first Appellant on 04.11.2003 for recovery of the duty short paid along with proposal for penalty and personal penalty on other two appellants. On adjudication, the demand was confirmed and penalty of equal amount imposed on the first Appellant and personal penalty on other two Appellants .

2.2 Aggrieved by the said order, the Appellants preferred appeals before this Tribunal on the ground that even though a report dt.19.08.2004 of the field formation was relied upon by the Adjudicating Authority in passing the order, a copy of the same was not handed over to them resulting into violation of principles of natural justice. Consequently, this Tribunal by its order dt.17.02.2005 remanded the matter to the Adjudicating Authority for de novo consideration, after supply of the report of the Assistant Commissioner dt.19.08.2004. Pursuant to the said Order, the learned Commissioner re-adjudicated the case and confirmed total demand of Rs.40,93,056/- and imposed equal amount of penalty under Section 11AC of Central Excise Act, 1944; also imposed personal penalty of Rs.25.00 lakhs on Shri Nanik Madnani, Authorised Representative and President, Rs.10,000/- on Shri K. Solanki under Rule 209A of erstwhile Central Excise Rules,1944 & 26 of Central Excise Rules 2002. Hence, the present appeals.

3. It is submitted on behalf of the Appellant submits that the Ld. Commissioner has disallowed the cash discounts, deductions on account of freight and special packing charges in confirming the demand. With regard to cash discount, it is his contention that the department has not disputed its admissibility when the same was availed by the customers, but disallowed when the cash discount was not availed by the customers. It is his plea that the principle on admissibility of cash discount is well settled in the case of Goodlass Nerolac Paints Ltd Vs UoI  1993 (65) ELT 186 (Bom.), which later affirmed by Hon'ble Supreme Court in UoI Vs Goodlass Nerolac Paints Ltd  1004 (73) ELT A 58 (SC), that to claim cash discount from the price, it is not necessary that all the customer should avail the discount, but, it is enough if all the customers are made known about the discount prior to removal of the goods. In the present case the Appellant, through their business policy circular indicated/ informed the customers all the nature of discounts, including cash discount, at the beginning of each financial year. Besides, the details of discounts also disclosed to the department in their declaration and marketing filed under Rule 173C of erstwhile Central Excise Rules,1944. It is his further contention that even after 01.07.2000, the admissibility of cash discount was held to be on the same terms and conditions as was earlier by Hon'ble Supreme Court in the case of Purolator India Pvt. Ltd. Vs CCE Delhi-iii -2015 (323) ELT227 (SC).

3.1. Assailing the impugned order, it is submitted that through their annual business policy circular they had disclosed the nature and percentage of eligible discounts to their customers, therefore, minor variations in the percentage of discounts disclosed in the declared Price Lists, and the business policy, which was carried to meet market exigencies, cannot be considered as non-disclosure of the percentage and nature of discounts to the customers before the removal of the goods. Further, the Ld. Chartered Accountant submitted that necessary certificates from the customers has been obtained by the appellant now to show that their business policy of passing various discounts from the price was made known to all the customers prior to removal of goods. Also, he has produced the respective party ledgers in support of their claim. He submits that they may be given a fair chance to produce these evidences before the adjudicating authority to establish that all details about the Cash discounts was made known to their customers before removal of the goods from their factory, 3.2. Further, it is submitted that the adjudicating authority has erred in denying the deduction of freight charges from the price on the ground that it was averaged and not claimed at actual basis. It is his contention that they have claimed the outward freight charges on actual basis, at the end of each financial year and accordingly paid the differential duty on the excess amount claimed initially at the time of removal of the goods, hence, the observation of the learned Commissioner is factually incorrect.

3.3 With regard to the deduction on account of special packing charges, it is submitted that the moulded furniture was normally cleared without any packing; accordingly in the excise invoices it was shown as loose. But, wherever it was cleared after special packing in hessian bags/jute covering, at the request of customers, in the relevant invoices it was shown as bundles. It is his argument that merely because the purchase orders were issued belatedly by the purchasers, the deduction on this count, cannot be denied to the Appellant.

3.4 It is further submitted that the demand is barred by limitation, as all the discounts were claimed on the basis of declarations made in their price lists. At the end of each financial year, on the basis of actual discount availed/passed on to the customers, on fulfillment of the conditions, (except cash discount), the assessable value of the goods was re-determined and the differential duty, if any payable, had been discharged by them. This fact has been intimated to the department periodically for each financial year.(referred to the copies of said intimations enclosed with the appeal paper book). Thus, there is no suppression of fact, hence, the demand cannot be sustained for extended period of limitation. In support he has referred to the following case laws: Cosmic Dye Chemical Vs Collr. Of C.E., Bombay 1995 (75) ELT 721 (SC); CCE Vs Chemphar Drug & Liniments 1998 (40) ELT 276 (SC); Pushpam Pharmaceuticals Co. Vs CCE Bombay 1995 (78) ELT 401 (SC); Tamil Nadu Housing Board 2004 (74) ELT 9 (SC); Mahakoshal Beverages Pvt. Ltd. Vs CCE Belgaum 2007 (6) STR 148; Pahwa Chemicals Pvt. Ltd. Vs CCE Delhi 2005 (189) ELT 257 (SC); Anand Nishikawa Co. Ltd Vs CCE(Appeals), Meerut 2005 (188) ELT 149 (SC).

3.5. Also, assailing the penalty imposed , they have submitted that since assessable value was re-determined on the basis of the principle of law laid down in the judgements of the Honble Bombay High Court and upheld by the Honble Supreme Court and also the issue is of interpretation is law, therefore, no penalty is imposable. Further, the learned Chartered Accountant submitted that even though the penalty under Section 11AC of Central Excise Act, 1944 has been imposed, but no option to pay 25% of the penalty amount has been extended to them. Further, he submits that the personal penalty on the employees of the Appellant company is unwarranted inasmuch as their role in alleged payment of duty on account of inadmissibility of discount claimed has not been discussed while imposing personal penalty under Rule 209A of erstwhile Central Excise Rules 1944 / under Rule 26 of Central Excise Rules 2002.

4. Per contra, the learned Authorized Representative for the Revenue reiterates the findings of the learned Commissioner. He has submitted that there is no dispute of the fact that the Appellant had availed various discounts including cash discount. The present dispute relates to the admissibility of cash discount amount Rs.13,43,380/- for the period prior to 01.07.2000 and Rs.3,00,898/- after 01.07.2000. The learned Commissioner in his findings has rejected the discount on the ground that the Appellant could not establish the fact that the Appellant had made known to their customers about the subject discount prior to removal of the goods as laid down by Hon'ble Supreme Court in Bombay Tyre Internationals case. The same principle has also been laid down by Hon'ble Bombay High Court in Goodlas Nerolac Paints Ltd 1983 ELT 189 (SC). Further, he has submitted that the certificate now produced from the customers indicating that the policy has been made known to them before removal of the goods cannot be acceptable at this stage as the same has no evidentiary value. On the admissibility of deduction on freight, he has submitted that the learned Commissioner has rejected their claim as Appellant had simply declared and claimed discount on account of freight @4%/5%/1.5% as per price declaration filed under Rule 173C of Central Excise Act,1944. On the claim of deduction on account of special Secondary packing, Ld. A.R submits that the Ld. Commissioner has rightly rejected the same after analyzing the purchase Order(s) of the respective customers produced by the Appellant claimed to have been issued in 1998-1999 as the same were found to be issued much after the period of delivery of the goods. Therefore, their contention that such special packing at the behest of customers is not acceptable.

4.1 The learned Authorized Representative further submitted that the difference between cash discount claimed and the actually passed on to the customers in the respective statements furnished with the department were shown as nil. But, the difference was noticed on this count by the Department during the course of scrutiny of their record . Hence, all the facts were not disclosed but suppressed from the Department. Further, it is his contention that the learned Commissioner has discussed in detail the role of Shri Nanik Madnani, who was authorized by the Board of Company to carry out day to day Central Excise work and signing all the documents relating to Central Excise. He is responsible for short payment of duty. Thus, the personal penalty on him is justifiable.

5. Heard both sides and perused the records.

5.1 The issue to be considered is: whether the Appellants are eligible to cash discount, and deductions on account of special packing charges and freight charges from the sale price, during the relevant period, in the determination of assessable value and discharge of duty. It is not in dispute that the Appellant had claimed various discounts like Turnover & quantity discount, cash discount, year ending discount, special discount, & deductions on account of freight and special packing from the normal sale price at the time of clearance of goods by filing necessary price declaration under Rule 173C of erstwhile Central Excise Rules, 1944 during the relevant period. On the basis of the actual discounts passed on and the expenditure incurred, the appellant-assessee re-determined the assessable value and discharged the duty on the differential value at the end of the each financial year.

6. The learned Commissioner while disallowing the cash discount, divided the period into two parts i.e. period prior to 01.07.2000 and after 01.07.2000 observing that the position of law was different during the said period. Now, in view of the judgment of Honble Supreme Court in the case of Purolator India Ltd Vs CCE Delhi-III  2015 (323) ELT 227 (SC), cash discount is admissible even after introduction of the transaction value w.e.f. 01.07.2000, on the same principle as admissible earlier, hence, the discussion for different periods, now becomes irrelevant.

7. In denying the cash discount from the price, the learned Commissioner, though accepted the principle laid down by Honble Bombay High Court in Goodlas Nerolac Paints Ltds case that all the customers need not avail the cash discount so as to allow the same as deduction from the price in arriving at the assessable value, however, observed that other main condition of disclosure of nature of cash discount to the customers prior to removal of the goods had not been fulfilled by the Appellant in the present case. In arriving at the said conclusion, the learned Commissioner reasoned that since there are apparent contradictions in the percentage of cash discount as declared in the price list filed under Rule 173C of erstwhile Central Excise Rules, 1944, mentioned in their business policy circular, written submissions during the adjudication proceedings, therefore, the customers could not have been informed about the true nature and percentage of cash discount prior to removal of the goods. On behalf of the appellant is vehemently argued that the cash discount was invariably disclosed in their business policy circular and certain customers availed the facility of such discount as per the said disclosure, but few customers did not avail such facility. Further, they submitted that had the percentage and nature of discount were not disclosed to their customers, then none of their customers would have availed such discount facility by making the payment in cash within the stipulated time. It is submitted that due to the market exigencies in the initial days of their business, the percentage of discount had been revised in a short period resulting variation in the Price declaration & policy circular, which cannot be considered as contradictions and ground for inference that the Appellant had not disclosed the discount policy to their customers. Further, it is vehemently argued that the Department has not raised dispute on the quantum of cash discount passed on to the customers who had availed cash discount facility on the basis of the said business policy circular. They placed certain letters issued by the customers acknowledging the receipt of their business policy circulars where the percentage and nature of cash discount had been disclosed.

7.1 We find force in the contention of the Appellant. Also, now they have procured letters/ communication from various customers accepting knowledge about the percentage and nature of cash discount through business policy circular; these evidences need to be scrutinized by the learned Adjudicating Authority. Hence, for verification of these evidences, the issue needs to be remanded to the Adjudicating Authority.

8. With regard to the deduction of expenditure on account of special packing charges, the learned Commissioner rejected the said deduction, as the Appellant could not substantiate their claim that the manufactured goods were cleared after undertaking special packing at the behest of the customers. The evidences in the form of purchase orders produced by the Appellant before Ld. Commissioner, on analysis found to be not genuine being issued subsequently, hence not accepted. The learned Chartered Accountant could not place any further evidence to rebut the finding of the learned Commissioner. On the other hand, the learned Chartered Accountant referred to various invoices where the moulded furniture were cleared in loose and also in some invoices as bundles. We could not find the said explanation as sufficient to arrive at the conclusion that the goods were cleared in special packing condition at the instance of the buyers so as to allow the expenditure as deduction from the price. In the result, the learned Commissioners finding on special secondary packing is upheld.

 (Pronounced in Court on 20.1.2016)



(Ashok K.Arya)                                                (Dr. D.M. Misra)               
Member (Technical)                                         Member(Judicial)
scd/ 

Appeal No.E/225  227/2007




13