2003 (5) TMI 439 - AT - Central Excise

Valuation - Abatement - Wholesale buyer - Words and phrases - Demand - Limitation - Declaration - Penalty - Imposition of

Issues Involved:
1. Nature of 1% discount: Whether it is a trade discount or remuneration/commission.
2. Eligibility of 1% discount for deduction from assessable value.
3. Limitation period for issuing the show cause notice.
4. Imposition of penalty and interest.

Issue-wise Detailed Analysis:

1. Nature of 1% discount:
The primary issue is whether the 1% discount given by the assessee to their wholesaler/reseller is a trade discount or a remuneration/commission for services rendered. The Commissioner concluded that the 1% discount is remuneration for services provided by the wholesaler/reseller, thus it is not a trade discount. The appellants argued that the agreement with the dealers contains commercial clauses typical in business agreements and that the 1% discount is part of the trade discount extended in the course of wholesale trade. However, the Commissioner found that the 1% discount is not a trade discount but a commission or remuneration for services rendered by the wholesaler/reseller.

2. Eligibility of 1% discount for deduction from assessable value:
The Commissioner held that the 1% discount is not eligible for deduction from the assessable value as it is not a trade discount but remuneration for services. The appellants contended that the 1% discount is part of the normal trade discount practice and should be deductible. They cited previous Tribunal decisions and Supreme Court judgments to support their claim that the 1% discount is not a commission. However, the Commissioner distinguished between trade discounts and commissions, concluding that the 1% discount is a remuneration for services and not deductible from the assessable value.

3. Limitation period for issuing the show cause notice:
The appellants argued that the longer period of limitation is not invocable as they had disclosed the nature and purpose of the 1% discount in the agreement provided to the Department. The Commissioner observed that the appellants had not specifically disclosed the nature and purpose of the 1% discount and that the show cause notice was issued within the extended period due to the appellants' failure to disclose this information. The Tribunal upheld the Commissioner's finding, stating that the filing of the agreement with the Department does not absolve the appellants from the duty demand.

4. Imposition of penalty and interest:
The Commissioner imposed a penalty of 100% of the duty determined under Section 11AC and ordered the payment of interest under Section 11AB. The appellants argued that the penalty and interest are not sustainable as the demand itself is not sustainable. The Tribunal found that the penalty of 100% was imposed without giving reasons and reduced the penalty to Rs. 10 lakhs. The interest under Section 11AB was confirmed.

Conclusion:
The Tribunal upheld the Commissioner's finding that the 1% discount is remuneration for services and not a trade discount, thus not eligible for deduction from the assessable value. The extended period of limitation was found to be applicable, and the penalty was reduced to Rs. 10 lakhs while the interest was confirmed.

← Previous Next →