Customs, Excise and Gold Tribunal - Delhi
Anant Raj Industries Ltd. vs Cce on 21 September, 2000
Equivalent citations: 2000(72)ECC422
ORDER P.G. Chacko, Member (J)
1. The appellants are manufacturers of Glazed Ceramic Tiles falling under Tariff Sub-heading 6906.10 of the Central Excise Tariff. They filed price lists/price declarations with the Department under Rule 173C from time to time, wherein they claimed deductions of quantity discount, cash discount and trade discount from depot sale price. On scrutiny of their RT.12 returns, the Department found that the appellants had cleared goods for home consumption from factory to duty paid depot and from the depot to buyers in different zones during the period November 1996 to November 1997. Three show cause notices (SCNs) were issues by the Department to the appellants for the periods 11 /96 to 3/97,4/97 to 6/97 and 7/97 to 11/97 proposing final assessment on the basis of price charged from customers at depot (by disallowing deduction of discount on the ground that the discount was not passed on to the customers) and also proposing to recover the amounts of Rs. 4,31,170.00, Rs. 13,82,217.00 and Rs. 14,25,281.00 towards Central Excise duty allegedly short-levied for the respective periods. The party contested the SCNs. The adjudicating authority confirmed the demand after allowing cash discount and quantity discount to the extent passed on the buyers and imposed a penalty of Rs. 8 lakhs. In the appeal filed by the assessees against this order of adjudication, the Commissioner (Appeals) allowed cash discount to be excluded from assessable value irrespective of whether such discount had been passed on to customers or not. She, however, upheld the Assistant Commissioner's decision in respect of quantity discount by relying on the Tribunal's decision in the cases of Vibgyor Chemicals v. CCE, Calcutta and Delton Cables Ltd. v. CCE, New Delhi . The demand of Rs. 4,31,170.00 covered by one of the SCNs was treated as having been closed in view of its settlement under the Kar Vivad Samadhan Scheme (KVSS). The penalty was reduced to Rs. 2 lakhs. The present appeals are against this decision as regards quantity discount and penalty.
2. We have heard Ld. Advocate Shri K. Sankararaman (Shri P.N. Kalra, CA, with him) for the appellants and Ld. SDR Shri P.K. Jain for the Revenue. In their miscellaneous application, the appellants have sought leave of the Bench to raise certain additional grounds (as stated therein) in support of the appeals. After hearing both sides on the said application, we have allowed the same in the interest of justice.
3. We note that the dispute involved in the present appeals is with regard to the admissibility of deduction of quantity discount from the assessable value of the goods as also with regard to penalty. Ld. Advocate, reiterating the additional grounds, submitted that the lower appellate authority had misapplied to the instant case the ratio of the Tribunal's decisions in the case of Vibgyor Chemicals (supra) and Delton Cables Ltd. (supra). He, further, relied on the following decisions in support of his argument that quantity discount was also liable to be excluded from assessable value irrespective of whether such discount had been passed on to the buyers or not.
(i) CCE, Calicut v. Kerala Soaps & Oils Ltd. [Final Order No. 699/97-A dated 25.4.1997 (T)].
(ii) CCE, Bombay v. Girish Paints 1997 (17) RLT 477
(iii) CCE, Meerut v. S.R. Fragrances Ltd. 1999 (35) RLT 665.
4. With regard to penalty, Ld. Advocate submitted that there was no warrant for imposing any penalty on the appellants inasmuch as they had declared the proposed deductions of the discounts in question, to the Department in their price declarations.
5. Opposing the above submissions, Ld. SDR submitted that none of the cases cited by Ld. Advocate was applicable to quantity discount, which, he contended, was different from the trade discount considered in those cases. Quantity discount was applicable only where the prescribed quantity of the goods was lifted by the buyer. Persons lifting large quantities formed a different class of buyers from persons lifting small quantities of goods. In this connection, Ld. DR relied on the decision of the Hon'ble Supreme Court in the case of Metal Box India Ltd. v. CCE, Madras . In the instant case, Ld. DR pointed out, a discount of 15% on invoice price had been offered by the appellants to every buyer who made purchase of 80,000 boxes in a period of 12 months as evidenced by the price declaration filed by them. Such discount was not liable to be excluded from the assessable value of the goods sold to those buyers who did not satisfy the said condition of lifting 80,000 boxes or more in the stipulated period of 12 months. The appellants did not pass on any such discount to the buyers who did not satisfy the condition. In the circumstances, the decision of the lower authorities was correct on the point of quantity discount. As regards penalty, Ld. SDR left the matter to the Bench.
6. We have carefully examined the rival submissions. The valuation dispute in respect of the goods is whether deduction of quantity discount as claimed by the appellants in their price lists/price declarations is admissible or not. We have considered the case law cited by Ld. Advocate in this connection. We note that, in the case of S.R. Fragrances Ltd. (Supra), the issue was with regard to cash discount only and not quantity discount. In the case of Girish Paints (supra), again, there is nothing to indicate that the issue in that case was one relating to quantity discount. In the case of Kerala Soaps and Oils (supra), we find that the Bench held, following the Tribunal's earlier decision in the case of CCE, Meerut v. Stallion Shox Ltd. , that deduction of cash discount must be allowed irrespective of whether it was availed by the customers or not. The Bench further held that the same principle should apply to quantity discount also. We note that no reason was stated by the Bench in so applying the said principle to quantity discount. We are of the view that the case law relied on by the lower appellate authority is categorically and correctly on the issue whether quantity discount was liable to be deducted from the assessable value irrespective of whether such discount was passed on to buyers or not. In Vibgyor Chemicals (supra), the assessees had declared, in their price list, different rates of quantity discounts. 15% was payable as discount in regard to transactions above the value of Rs. 30,000. The Bench held that different discounts could be validly given on the basis of the quantity or value of clearances. We do not find any reason how this decision of the Tribunal could be of any assistance to the present appellants. The present appellants, in their price declaration, declared that 15% on the invoice price of the goods would be available as discount to every buyer who made purchases of 80,000 boxes in a period of 12 months. As per the decision of the Tribunal in Vibgyor Chemicals (supra) only those buyers who made purchases of 80,000 boxes or more in a period of 12 months would be entitled to avail the discount of 15% offered by the appellants and, only in that event, the discount could be permitted to be excluded from the assessable value of the goods. If the benefit of discount did not pass on to the buyers, such deduction from the assessable value would not be admissible. We find that the same view is reflected in the decision of the Tribunal in Delton Cables Ltd. (supra) as well. The lower appellate authority has correctly decided the question of admissibility of quantity discount for deduction from the assessable value of the goods, following the above decisions of the Tribunal. We uphold the decision of the lower appellate authority on the issue.
7. However, on the question of penalty, we find that even a penalty of Rs. 2 lakhs as imposed by the lower appellate authority cannot be sustained in the facts and circumstances of this case. Ld. Commissioner (Appeals) appears to have overlooked the fact that the appellants, in their price lists/price declarations, disclosed to the Department that they proposed to allow 15% discount to their customers on condition that the latter purchased the minimum prescribed quantity of 80,000 boxes in a period of 12 months. They also claimed deduction of such discount from the assessable value of the goods. In the circumstances, it would not be justifiable to hold the assessees liable to penal action.
8. In view of the aforesaid findings, we reject the appeals on merit but set aside the penalty imposed on the appellants by the lower authorities.
(Operative part of this order has already been pronounced in open Court on 21.9.2000)