2004 (10) TMI 393 - AT - Central Excise

Summary

Issues:
Eligibility of deduction on account of discount in determining the assessable value under Section 4 of the Central Excise Act.

Analysis:
In the appeal filed by Revenue, the main issue revolved around the eligibility of deduction on account of discount in calculating the assessable value under Section 4 of the Central Excise Act. The Respondents, engaged in manufacturing piston rings and gudgeon pins, provided trade discounts to their Chief Stockists and sub-stockists. The dispute arose when the Assistant Commissioner disallowed a 2.5% trade discount, leading to a directive for duty deposit by the Range Superintendent. Upon appeal, the Commissioner (Appeals) referenced previous decisions by the Appellate Tribunal and the Supreme Court in similar cases involving discount allowances.

The Commissioner (Appeals) highlighted that the Appellate Tribunal had previously ruled in favor of similar discount practices in Final Order No. 1251/98-A, dated 21-8-1998. Additionally, the Commissioner noted the Supreme Court's affirmation of discount allowances in Civil Appeal No. 2659/99 [2003 (156) E.L.T. A111 (S.C.)]. The Respondents also cited a Supreme Court decision from 2002 supporting their discount claims. However, the Revenue relied on a recent Supreme Court decision involving M/s. Escorts Ltd., which addressed the deductibility of differential discounts between stockists and sub-stockists in determining excisable value.

The Supreme Court's judgment in the case of M/s. Escorts Ltd. clarified the treatment of differential discounts passed on to stockists, emphasizing that such discounts should not be deducted when calculating the normal price of goods sold to sub-stockists. The Court reasoned that the differential discount was not directly related to the goods sold to the area stockists and, therefore, should not be considered a discount applicable to sub-stockists. In light of this precedent, the Appellate Tribunal, following the Supreme Court's guidance, overturned the impugned order and allowed the appeal filed by the Revenue, aligning with the latest Supreme Court ruling on the eligibility of such discounts in determining assessable value under the Central Excise Act.