Custom, Excise & Service Tax Tribunal
Bajaj Electricals Ltd vs Commissioner Of Central Excise, ... on 2 July, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL Nos. E/3738 to 3740/05-Mum (Arising out of Order-in-Appeal No. P-III/214 to 216/2005 dated 11.7.2005 passed by Commissioner of Central Excise (Appeals), Pune-III) For approval and signature: Honble Mr. P.K. Jain, Member (Technical) and Honble Mr. S.S. Garg, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should 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 : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Bajaj Electricals Ltd. Appellant Vs. Commissioner of Central Excise, Pune-III Respondent Appearance: Shri T.C. Nair, Advocate, for appellant Shri Sanjay Hasija, Superintendent (AR), for respondent CORAM: Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S.S. Garg, Member (Judicial) Date of Hearing: 26.6.2015 Date of Decision: 2.7.2015 ORDER NO Per: P.K. Jain
Brief facts of the case are that the appellants are manufacturing various types of fans and were selling to their wholesaler/dealer. For selling the same, they used to give trade discount per fan. In addition to the trade discount, they were also reducing the bill in the name of service charges, which was again based upon per piece of fan. Revenues objection is that service charges will form part of the assessable value and no deduction can be given for the service charges. Appellants contention, on the other hand, is that service charges is also a type of discount and it is uniformly given to all the wholesalers/dealers and the quantum of service charges to be deducted is known to the department as well as to the dealers and, therefore, the amount is required to be deducted. It is also the submission that due to the objection from the department, w.e.f. 1st September 1999 they changed the nomenclature from service charges to additional trade discount and hence at least after the said date, they should be given the benefit of the said discount.
2. The learned counsel for the appellant reiterated the above mentioned submissions and submitted that there are catena of judgments of various courts that any discount by whatever name it is given. If it is available uniformly to all the persons and the discount is well known in advance to the department as also the customers, then the discount is to be allowed. In support of the contention, the learned counsel submitted the following case laws:-
(i) Perfect Circle Victor Ltd. reported in 1992 (60) ELT 676 (SC);
(ii) Seshasayee Paper & Boards reported in 1990 (47) ELT 202 (SC);
(iii) Bajaj Auto Ltd. reported in 2014 (300) ELT 434 (T);
(iv) Torque Pharmaceuticals reported in 2009 (248) ELT 604 (T).
3. The learned AR, on the other hand, submitted that for admissibility of the discount, first of all the appellant has to prove that it is a trade discount. If there is a deduction for some other reason, then that cannot be called as a trade discount. For example, if an amount is deducted for providing post clearance services to goods either in the dealers premises or in the customers premises, the same cannot be called as a trade discount but that is payment of service charges by the manufacturer to the dealer. Such charges would form part of the assessable value as the same is adduced to the value and marketability of the goods as held by the Honble Supreme Court in the famous case of Bombay Tyres International. It was further submitted by the learned AR that a three-Member Bench of this Tribunal in the case of Premier Automobiles Ltd. vs. CCE reported in 1985 (20) ELT 156, has clearly held that after-sales services charges is not a trade discount, hence includable in the assessable value.
4. We have considered the rival submissions. We note that the three-Member Bench of this Tribunal in the case of Premier Automobiles Ltd. has observed as under:-
4.As stated earlier, the learned counsel for the? appellants has drawn our attention to the clarification given by the Supreme Court while construing the expression trade discount. It is true that the Court has held that discount allowed in the trade should be allowed by whatever name such discount is described. However, this finding has been further elaborated by the Court and for this purpose, we reproduce below the relevant portion of the judgment:-
Discount allowed in the Trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. (emphasis supplied) Thus, the Supreme Court has laid lot of stress on the fact that trade discount to be treated as such must stand the test of established practice of the Trade and commerce. We find ourselves unable to accept the contention of the learned counsel for the appellants that after-sales service charges could be treated as a discount, in the light of the guidelines set out by the Supreme Court. For all these reasons, we are unable to agree with the contentions put forth by the learned Counsel for the appellants. We also note that in the impugned order, the Commissioner (Appeals) has observed as under:-
7. The appellants have not produced any evidence to show that the "service charges" are in the nature of discounts. They have merely stated that it is a discount and given uniformly. The appellant have nowhere given the details of the nature of transaction with the customer on the invoice. It was also necessary to mention on the invoices what service charge " means. Therefore, the customer does not know that' Service Charge " is a discount. It is necessary that customer should know from the invoice that discount is clearly shown on the invoice and the same is passed on to the customer then only deduction on account of discount is permissible under the law . A detailed nature of transaction with their customers and the place this "service charge" occupies in that transaction should have been provided. In the balance sheet they have shown service charges*' on the Expenditure side with Product Promotion" meaning thereby that it is related to promotion of the product and is not a discount. The appellants have merely stated that service charges' are nothing but discount like cash and trade discount. If that is so they should have mentioned it on invoices No deduction separately on account of "service charge" is shown on the invoices On the invoice discounts are shown as 'disc 20PP + 25PPV r service charge' is a discount a mention of the same should have been made on the invoice. The appellants cannot rely and claim benefit of the cases relied upon by them since they have not been able to show that "service charges are discounts.
8 If" Service Charge " is claimed to be a discount in Annexure - 2 C, it should have been appeared on the invoices in the same fashion as normally other discounts like trade discount, cash discount, etc are shown by the trade as a trade practice.
5. During the hearing, the case was adjourned 2-3 times to enable the learned counsel for the appellant to submit documentary evidence to indicate that service charges is a trade discount. To us, the service charges do not appear to be a trade discount for the simple reason that in the same invoice there is a discount with the name trade discount. The learned counsel for the appellant, in spite of 2-3 adjournments, has not been able to bring out any evidence whatsoever to support his contention that deduction due to service charges are nothing but trade discount. In the absence of any documentary evidence, we are unable to accede to the contention.
6. We also note that w.e.f. 1.9.1999, the department raised this objection that the appellants changed the nomenclature to additional trade discount. To our mind, by changing the nomenclature, they are only trying to mislead the department and by change of the nomenclature, service charges cannot become additional trade discount. In view of this position, in our view, even after 1.9.1999, the said deduction has to be considered as deduction towards service charges.
7. In the result, all the appeals filed by the appellants are dismissed.
(Pronounced in Court on 2.7.2015) (S.S. Garg) Member (Judicial) (P.K. Jain) Member (Technical) tvu 1 6