2009 (1) TMI 724 - AT - Central Excise

Summary

Issues involved: Appeal against demand for Central Excise duty based on collection of extra amounts labeled as trade expenses, contention of amounts being cash discounts, time limitation for demand, classification of expenses as trade discounts, applicability of case laws, and failure to establish nature of discounts.

The appellant, engaged in manufacturing texturised yarn, appealed against a demand for Central Excise duty, interest, and penalty u/s 11A, based on collecting extra amounts termed as trade expenses from customers, not reflected in the balance sheet.

The appellant argued that the amounts collected were actually cash discounts, supported by evidence of issuing credit notes for timely payments by buyers. They also contended that part of the demand was time-barred as the Department was aware of the transactions.

The Commissioner (Appeals) found that the amounts labeled as trade expenses were not trade discounts, as they were not passed on as discounts to buyers but collected as extra amounts. The show cause notice was deemed within the time limit u/s 11A as the department became aware of the issue only after scrutiny in 2004.

The appellant's reliance on case laws applicable to trade discounts was dismissed, as the amounts collected were not in the nature of discounts. The Commissioner (Appeals) noted that the appellant failed to demonstrate that the amounts given to buyers were indeed trade discounts or cash discounts.

The Tribunal upheld the Commissioner (Appeals) decision, rejecting the appeal as the appellant could not establish that the amounts collected were trade discounts or cash discounts, as required under the new Section 4 provisions.

Separate Judgement: None