2007 (5) TMI 19 - AT - Central Excise

Issues Involved:
1. Applicability of quantity discount in the context of Section 4A valuation.
2. Determination of assessable value for excise duty under Section 4A.
3. Interpretation of free supply and its implications on excise duty.

Issue-wise Detailed Analysis:

1. Applicability of Quantity Discount in the Context of Section 4A Valuation:

The appellant, a manufacturer of P & P medicines, claimed quantity discounts by giving free goods to wholesalers. The original authority and Commissioner (Appeals) held that under Section 4A of the Central Excise Act, 1944, quantity discounts were not admissible, and the assessable value should be the retail sale price less abatement. The appellant argued that duty should be on the net quantity sold, relying on the Tribunal's decision in Vinayak Mosquito Coil Manufacturing Company, which was affirmed by the Supreme Court. However, the Tribunal clarified that quantity discounts applicable under Section 4 do not extend to Section 4A, as Section 4A valuation is based on MRP minus abatement, making transaction price irrelevant.

2. Determination of Assessable Value for Excise Duty under Section 4A:

Section 4A provides an alternate mode of valuation for commodities notified by the Central Government, where the assessable value is the MRP minus abatement. The Tribunal emphasized that Section 4A is overriding in nature, with a non obstante clause making transaction prices irrelevant. The Central Government specifies the abatement to be given from the MRP to arrive at the assessable value. The Tribunal rejected the appellant's claim that 25 boxes given free with 100 boxes should not attract duty, stating that the sale transaction is for the gross quantity, and the price is for 125 boxes, not 100.

3. Interpretation of Free Supply and Its Implications on Excise Duty:

The Tribunal noted that even if goods are supplied free, duty is payable on removal, whether on sale or otherwise. The appellant's reliance on Vinayak Mosquito Coil Manufacturing Company was misplaced, as the Tribunal clarified that no duty exemption exists for free supplies unless specifically exempted. The Tribunal rejected the notion that if there is no sale, no duty is payable, emphasizing that duty is chargeable on removal of goods. The Tribunal held that the claimed free supply is not for the ultimate customer and carried MRP, thus duty should be discharged on the entire quantity, including goods given as quantity discount, based on the value under Section 4A after abatement.

Conclusion:

The Tribunal dismissed the appeals, holding that:
(a) Sale is not a necessary condition for charging excise duty; duty becomes payable on removal of excisable goods.
(b) Quantity discount under Section 4 is not applicable in determining value under Section 4A.
(c) Duty shall be discharged on the entire quantity, including goods given as quantity discount, based on the value arrived at under Section 4A after abatement.

Pronouncement:

The judgment was pronounced in open court on 21-5-2007.