Customs, Excise and Gold Tribunal - Delhi
Mahavir Spinning Mills Ltd. vs C.C.E. on 26 September, 2006
Equivalent citations: 2006(113)ECC92, 2006ECR92(TRI.-DELHI), 2007(207)ELT94(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. Assessee is a manufacturer of sewing thread and sells the threads from 30 depots to wholesale dealers. Since sale prices at the depots were not known at the time of removal of goods from the factory, assessments were initially made on provisional basis and subsequently finalized under order dated 31.1.2003 of the Assistant Commissioner of Central Excise, Hoshiarpur.
2. The assessee had claimed several deductions from the list price for the purpose of arriving at the assessable value. The assessee succeeded before the original authority and the first appellate authority in regard to ail such deductions except for "additional discounts". The reason of the Assistant Commissioner for denying this discount was that "Additional Discounts were not uniformly allowed to all the buyers as the credit notes were issued after effecting sale and through negotiation with the buyers and the purpose of allowing this discount was also not disclosed to the department". When the dispute came before Commissioner (Appeals), he held that additional discount was given purely on a discretionary basis and the criterion is not disclosed to the department. He also noted that discounts were not being given validity period wise. For these reasons, he upheld the denial of the additional discount for the purpose of fixing assessable value. Present appeal of the assessee challenges the findings of the lower authorities.
3. The submission of the learned Counsel for the assessee is that all the discounts including additional discount are purely commercial and that discounts were given at a uniform rate for dealers located in the same area. It is being pointed out that commercial nature of the discounts is made clear by the Circular on Trade Discount of the appellant referred to in the order of the Commissioner. Appellant has also filed before us charts of discounts given to show that the discounts were given on a uniform basis at a given time to all the dealers located in a particular area. We may mention the statement filed in regard to sales from depots at Ernaculam and Ahmedabad in this context.
4. Submission of the learned Counsel for the appellant is that it is well settled that a discount, by whichever name called, is a permissible deduction and uniformity is also no criterion for the purpose of allowing trade discount.
5. Learned SDR would contend that if the appellant was granting discounts to different classes of buyers, it is the requirement that the criterion for determining each class must be made out. Reference in this connection is made to the judgment of the Hon'ble Supreme Court in the case of TISCO . Learned SDR also would submit that widely varying discounts for purchases in the same area would not be permissible for assessment as held by the Hon'ble Supreme Court in the case of Kirloskar .
6. In his reply to the points made by the learned SDR, it is being pointed out by the learned Counsel for the appellant that the aforesaid judgment did not apply to the facts of the present case. Firstly, because the appellant was not selling to different class of buyers; sales were only to wholesale dealers. Secondly, because there is no variation in price in the same area as brought out by the statements filed in regard to various (Ernakulam and Ahmedabad) depots.
7. Value for the purpose of central excise assessment is the net commercial price arrived at after deducting, inter alia, discounts. Criterion for discount is that it should not be refundable for any reason. In the present case, the commercial nature of the discount is not in dispute. Sale policy of the assessee which has been quoted in the order of the Commissioner brings out that discount is allowed after taking permission from the Central Marketing organization and in such a way as to meet the competition in the market. There is no allegation or finding that the discounts given area wise by the appellant were for consideration other than purely commercial ones. Sale order in the present case, samples of which have been filed before us, makes clear that additional discount in dispute is one of the items specifically mentioned in the sale order. The rate of discount given is also indicated. Sale order also indicates, how much of it would be given in the invoice itself and how much given through credit notes. The second part of the additional discount was being adjusted in the account of each dealer. Thus, it is clear that this discount is also known at the time of sale of the goods and that it is passed on as a matter of fact. It is well settled that time of granting discount is not relevant for the purpose of determining whether the discount is to be allowed for the purpose of deduction. Thus, this discount satisfied all the requirements of being known at the time of clearance of the goods as well as not being returnable for any reason.
8. In view of what is stated above, we hold that the impugned orders were in error in disallowing the additional discount as permissible discount. All the orders are, therefore, set aside.
9. Commissioner (Appeals)'s order also raised the issue whether the refund arising from the finding of provisional assessment would be hit by unjust enrichment. As already noted, a part of the discount is passed through credit notes and is adjusted in the outstanding bills of the wholesale dealers. Therefore, discount and tax applicable on it does get adjusted on monthly basis. Therefore, this is not a case where tax has been passed on to the buyers. Therefore, the question of unjust enrichment cannot arise in the present case. Accordingly, the finding on this score is also set aside.
10. Appeal Nos. E/2280 - 2285/05 were filed by the revenue. One contention raised in these appeals is that the cost of loading of goods in the factory (duty involved Rs. 22,760/-) is required to form part of the assessable value. This contention is required to be accepted as all costs upto delivery of goods at the factory gate ought to form part of assessable value. Revenue's appeals are allowed on this ground. The other ground taken in the order is that there is calculation error in the orders of the lower authorities. This objection is not material since we have already held that additional discount is a permissible discount.
11. The appeals are ordered in the above terms. Lower authorities shall make recovery/refund, as the case may be, in terms of the above findings.
(Dictated and pronounced in open Court)