Custom, Excise & Service Tax Tribunal
M/S Insecticides (India) Ltd vs Cce, Jaipur I on 11 December, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 11/12/2014. DATE OF DECISION : 11/12/2014. Excise Appeal No. 1236 of 2005 with Misc. Application No. 53986 of 2014 [Arising out of the Order-in-Original No. 36/2004 dated 31/12/2004 passed by The Commissioner of Central Excise, Jaipur.] For Approval and signature : Honble Shri Rakesh Kumar, Member (Technical) Honble Shri S.K. Mohanty, Member (Judicial) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would 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 of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Insecticides (India) Ltd. Appellant Versus CCE, Jaipur I Respondent
Appearance Shri B.L. Narasimhan, Advocate for the Appellant.
Shri R.K. Grover, Authorized Representative (DR) for the Respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) Honble Shri S.K. Mohanty, Member (Judicial) Final Order No. 54954/2014 Dated : 11/12/2014 Per. Rakesh Kumar :-
The appellant are manufacturers of insecticides. The period of dispute in this case is from March 2002 to October 2002. During this period, the appellant were clearing the goods manufactured by them to their depot on stock transfer basis and the goods were being sold from the depot. The appellant were giving various discounts trade discounts, that is the discounts in respect of sales from depots located in different regions, quantity discount and turnover discounts. At the time of clearance from the factory, the goods were being cleared on payment of duty on a price (called transfer price) after availing the maximum discount and, thereafter, when the goods were sold from the depots and the exact quantum of discount passed on was known, and if the discount availed at the time of clearance from the factory was found to be more than the discount actually given, the differential duty was being paid. In fact Annexure II-C of the ER-1 return for the month of March 2002 placed on record, carries an endorsement that in respect of sales through various depots on any difference between the transfer price and depot sale, excise duty would be deposited. The fact that various discounts being offered by the appellant to their customers were known prior to the clearance of the goods is not in dispute. In some cases, the appellant were mentioning quantum of discounts in the invoices themselves, but in some cases, while the sales invoices mentioned full price without discounts; subsequently the discounts were extended by the way of the credit notes. Commissioner in the impugned order has allowed the discounts which were passed on through invoices, but, however, he has disallowed the discount which are passed on through credit notes. It is on this basis that duty demand of Rs. 35,62,555/- has been confirmed against the appellant for the period from March 2002 to October 2002, alongwith interest and penalty of equal amount has been imposed. Beside this, there is also allegation of wrong Cenvat credit of Rs. 4,01,633/- and short payment of duty of Rs. 1,891/- which are not disputed.
2. Heard both the sides.
3. Shri B.L. Narasimhan, Advocate, the learned Counsel for the appellant, pleaded that as is clear from para 22 of the impugned order, the Commissioner has allowed the discounts which were passed on through invoices, that he, however, has disallowed the discounts which were passed on through credit notes, even though he has given a finding that the genuineness of this credit notes through which the appellant have given the after sale discounts, has been established, that the only ground on which the discount has been disallowed is that the assessee did not intimate to the Department about the discount, which they passed on and also they did not resorted to provisional assessment for the clearances effected from the factory, that this ground for disallowing of the discount is totally wrong, that Tribunal in the case of Bipico Industries (Tools) Pvt. Ltd. vs. CCE & CUS, Vapi reported in 2009 (247) E.L.T. 811 (Tri. Ahmd.) has relying upon its earlier decision in the case of CCE, Coimbatore vs. Texmo Industries reported in 2008 (226) E.L.T. 375 (Tri. Chennai) has held that the discounts not given in the invoices, but subsequently paid to the dealers by issuing the credit notes are admissible for deduction, and that same view has been taken by the Tribunal in the case of Gujarat Borosil Ltd. vs. CCE, Surat II reported in 2010 (253) E.L.T. 610 (Tri. Ahmd.) and also in the case of Triveni Glass Ltd. vs. CCE, Allahabad reported in 2003 (162) E.L.T. 529 (Tri. Del.). He, therefore, pleaded that the impugned order confirming the duty demand of Rs. 35,62,555/- by disallowing the discounts passed by appellant through credit notes is totally incorrect and is not sustainable. With regard to wrong availment of Cenvat credit of Rs. 4,41,633/- and short payment of duty of Rs. 1,891/- Shri Narasimhan, learned Advocate, not contesting the duty/ Cenvat credit amount, contested the imposition of penalty of equal amount under Section 11AC on the ground that the short payment of duty/wrong availment of credit was not deliberate and as soon as the same was pointed out by the officers, the amount was promptly paid and therefore the same should be treated as payment under Section 11A (2B) and hence penalty of equal amount would not be imposable. He also pointed out that in respect of the wrong availment of Cenvat credit of Rs. 4,41,633/- and short duty payment of Rs. 1,891/-, the Commissioner has not given any finding as to whether this wrong availment of credit or short payment of duty was deliberate with intent to evade the payment of duty and has simply imposed penalty of equal amount under Section 11AC, which is not correct.
4. Shri R.K. Grover, the learned DR, defended the impugned order by reiterating the findings of the Commissioner.
5. We have considered the submissions from both the sides and perused the records.
6. The first point of dispute is the duty demand of Rs. 35,62,555/- by denial of the deduction of trade discount and turnover discount which had been passed on to the customers through credit notes. The fact that these discounts were known prior to the clearance of the goods is not in dispute. The Commissioner, in fact, has allowed the deduction of these discounts wherever these discounts had been passed on to the customers in the invoices. He has disallowed the discounts only in those cases where the discounts were not mentioned on in the invoices, but were passed on by the way of credit notes. However, in para 22 of the impugned order he has also given a finding that the genuineness of the credit notes through which they have given the sales discounts has been established. The only ground on which the deductions of these discounts has been disallowed is that the appellant had not intimated to the Department about the discount which they intended to passed on through credit notes, after the sales through depot and they have not resorted provisional assessment. In our view, the grounds on which the deduction of the discounts passed on through credit notes has been disallowed are totally wrong. In terms of the Apex Courts judgment in the case of Union of India and Ors. vs. Bombay Tyre International Ltd. reported in 1983 (14) E.L.T. 1896 (S.C.) a trade discount would be admissible for deduction if it is known prior to clearance of the goods and for permitting the deduction of trade discount, it is not material that it must be given at the time of sale and the deduction would be permissible even if the trade discount is quantified after the sale and is given subsequently. It is seen that the Tribunal in the case of Bipico Industries (Tools) Pvt. Ltd. vs. CCE & CUS, Vapi (supra), CCE, Coimbatore vs. Texmo Industries (supra) and Gujarat Borosil Ltd. vs. CCE, Surat II (supra) has taken same view holding that the discounts passed on by credit notes and not shown in the invoices would be admissible. In view of this, the impugned order confirming the duty demand of Rs. 35,62,555/- alongwith interest and imposing penalty of equivalent amount on the appellant under Section 11AC is not sustainable and is set aside.
7. As regards short payment of duty of Rs. 1,891/- in respect of some clearances and are wrong availment of Cenvat credit of Rs. 4,41,633/- the duty/Cenvat credit demands are not disputed and have already been paid by the appellant much before the issue of the show cause notice. In respect of these amounts, it is only the imposition of equivalent penalty under Section 11AC which is being disputed on the ground that these amounts had been paid as soon as the short payment of duty/wrong availment of Cenvat credit was pointed out and these payments must be treated as under Section 11A (2B) and, hence, there is no question of imposition of penalty under Section 11AC. The only situation in which the Section 11A (2B) would be inapplicable is when the short payment of duty or wrong availment of Cenvat credit is deliberate with intent to evade the duty. But on going through this order, we find that there is no such finding by the Commissioner on this point and he has simply imposed penalty of equal amount i.e. Rs. 4,41,633/- + Rs. 1,891/-, without giving finding as to whether wrong availment of Cenvat credit or short payment of duty was deliberate, on account of fraud, wilful misstatement, suppression of fact etc. on the part of the appellant. The penalty under Section 11AC cannot be imposed when the amount of Cenvat credit wrongly taken or duty short paid on being pointed out was paid forthwith alongwith interest and intimation in this regard was given to the Department and such short payment of duty/wrong availment of credit is not deliberate with intent to evade the duty, for which in this case, there is no evidence. In view of this, we hold that penalty of Rs. 4,42,534/- is also not sustainable.
8. In view of the above discussion, while the impugned order confirming the duty/ Cenvat credit demand of Rs. 4,42,435/- is upheld, the remaining portion of the impugned order is set aside. The appeal stands disposed of, as above. As regards, the miscellaneous application, for extension of stay, the same is dismissed as infructuous.
(Dictated and pronounced in open court.) (Rakesh Kumar) Member (Technical) (S.K. Mohanty) Member (Judicial) PK ??
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