2008 (8) TMI 687 - AT - Central Excise

Summary

Issues:
1. Interpretation of terms in the Dealership Agreement between the parties.
2. Classification of M/s. DIS as a dealer or commission agent.
3. Liability of the respondents for Central Excise duty and penalty.

Interpretation of Dealership Agreement:
The original authority demanded Central Excise duty from the respondents for goods supplied to buyers directly under G.Ps and covered by commercial invoices raised on M/s. DIS. The dispute revolved around the interpretation of the Dealership Agreement between the parties. The lower appellate authority analyzed the terms of the Agreement, which appointed M/s. DIS as one of the dealers of the respondents. The Agreement specified that M/s. DIS would be charged the List Price for standard products with a 20% trade discount. Additionally, a Supplementary Agreement allowed M/s. DIS to offer discounts for purchase orders. The lower appellate authority concluded that M/s. DIS acted as a dealer entitled to the trade discount, supported by the terms of the Agreement.

Classification of M/s. DIS:
The main issue was whether M/s. DIS should be classified as a dealer or a commission agent. The Revenue challenged the decision of the Commissioner (Appeals) who considered M/s. DIS as a dealer and set aside the duty demand and penalty imposed on the respondents. The Tribunal examined the records and found that M/s. DIS functioned as a dealer as per the terms of the Dealership Agreement. The Tribunal disagreed with the Special Deputy Registrar (SDR) who argued that M/s. DIS should be treated as a commission agent. The Tribunal clarified that its earlier observation regarding M/s. DIS being a commission agent was not a binding finding but a part of the remand order for further adjudication. Ultimately, the Tribunal upheld the lower appellate authority's decision that M/s. DIS was a dealer, and the duty paid by the respondents was appropriate based on the discounted price.

Liability for Central Excise Duty and Penalty:
The Tribunal concluded that the sale of goods by the respondents to M/s. DIS was on a principal-to-principal basis, establishing M/s. DIS as a dealer. Therefore, the duty paid by the respondents on the assessable value of goods determined by the discounted price was deemed correct. The Tribunal affirmed the lower appellate authority's decision, dismissing the Revenue's appeal. The judgment highlighted that the dealer had the discretion to offer discounts to customers, reinforcing the dealer status of M/s. DIS. The Tribunal's decision clarified the liability of the respondents for Central Excise duty and penalty, providing a detailed analysis based on the terms of the Dealership Agreement and the nature of the transactions involved.