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K.K. Usha, J. (President)

1. This is an appeal at the instance of the assessee challenging the order passed by the Commissioner of Central Excise, Indore dated 30.10.2001. The issue raised for consideration is whether quantity discount availed by the appellant from the suppliers of raw materials is liable to be added to arrive at the assessable value of its product.

2. The appellants are engaged in the manufacture of LINEAR ALKYL BENZENE SULPHONIC ACID (LABSA) falling under Chapter Heading 3402.90 of the Schedule to the Central Excise & Tarif Act, 1985 and Spent Sulphuric Acid falling under Heading 2807. In these appeals we are concerned only with the dispute relating to assessable value of LABSA. The main inputs for manufacture of LABSA are (1) LINER ALKYL BENZENE (LAB) and (2) Sulphuric Acid. The appellants are procuring LAB from three manufacturer suppliers, namely, M/s. Indian Petrochemicals Corporation Ltd. (IPCL), M/s. Tamil Nadu Petro Products Ltd. (TPPL) and M/s. Reliance Industries Ltd. (RIL). They were procuring Sulphuric Acid from M/s. Rama Phosphates, Indore and M/s. Khaitan Fertilizers Ltd. LABSA manufactured by the appellant are sold to M/s. Hindustan Lever Ltd. (HLL), M/s. Vikram Detergent Pvt. Ltd. (VDPL), M/s. Guljag Chemicals Pvt. Ltd. and M/s. Indira Poly Fab Pvt. Ltd., M/s. Varuna Detergents and M/s. Oriclean Pvt. Ltd. M/s. HLL is a bulk buyer of LAB from IPCL. They were therefore being granted bulk discount by IPCL. On the recommendation of HLL the appellants were granted such discount by IPCL.

3. Show cause notice was issued to the appellant on 5th July 1996 demanding a duty of Rs. 6,08,28,462 on two grounds. It was alleged that Modvat credit taken by the appellants on the raw material (inputs) was not included in the assessable value of LABSA and the demand on the above basis accounted for Rs. 4,19,53,363. This demand was dropped by the Commissioner in view of the decision of the Tribunal in Dai Ichi Karkaria v. CCE, Pune 1996 (81) ELT 676, which was later upheld by the Supreme Court in CCE, Pune v. Dai Ichi Karkaria, 1999 (65) ECC 354 (SC) : 1999 (112) ELT 353 (SC).

4. The second part of the demand covering Rs. 1,88,75,099 was on the basis on non-inclusion in the assessable value of LABSA the bulk quantity discount availed by the appellants from the suppliers of raw materials LAB. It was alleged that the appellant receives this discount on account of their buyers HLL. Therefore, the amount of discount is to be treated as additional consideration received by the appellant which is to be added to the assessable value of LABSA. The Commissioner passed a common order in respect of ten show cause notices and confirmed the duty demand of Rs. 2,32,84,360. Penalty of an equal amount was imposed under Section 11AC of the Central Excise Act read with Rule 173Q of the Central Excise Rules. Appellant was also held liable to pay interest under Section 11AB.

5. It is contended on behalf of the appellant that discount received from raw material supplier cannot be treated as additional consideration in terms of Rule 5 of the Central Excise Rules. It is submitted that prior to 1.4.94 they were paying duty on the gross price without taking into consideration the discount due to mistake. But from 1.4.94 the discounted price was taken into consideration and they paid duty on the discounted price. In any view of the matter, it is submitted by the Learned Counsel for the appellant that the net price charged by the buyers of LABSA prior to 1.4.94 and after 1.4.94 was the same. According to the appellant they are, in no way, related to HLL or any buyer. The transaction was on principal to principal basis. The department has no case that the assessable value of LAB was wrongly given and no proceedings had been initiated against the manufacturer of LAB on that ground. It is further contended that the price of HLL is in no way depressed for the reason of receiving bulk discount on the raw material LAB. The sale price of other manufacturers of LABSA is approximately the same as of the appellant.