2017 (4) TMI 1294 - AT - Central Excise

Valuation - includibility - nature of trade discount extended - special type of electrodes for reclamation purposes which were sold by the respondent through the distributor i.e. M/s. Ador Fontech Ltd. - Held that - the discounts extended by the respondent to M/s. Adore Fonetech Ltd. is in the nature of normal trade discount, and need not be included - appeal dismissed - decided against Revenue.

Summary

Issues: Valuation of goods for customs duty - Inclusion of trade discounts in assessable value

In this case, the Appellate Tribunal CESTAT BANGALORE considered an appeal filed by Revenue against an Order-in-Appeal passed by the Commissioner (Appeals) regarding the inclusion of trade discounts in the assessable value of welding electrodes sold by the respondent. The dispute arose from the special type of electrodes for reclamation purposes sold through a distributor, M/s. Ador Fontech Ltd., with the Revenue contending that the additional trade discount extended by the respondent should be included in the valuation of goods to meet expenses in publicity, marketing, and selling. The original authority demanded differential duty based on this contention. The Commissioner (Appeals) set aside the Orders-in-Original, prompting Revenue to appeal before the Tribunal, arguing that advertisement and publicity charges borne by dealers should be included in the assessable value, even in principal-to-principal billings.

The Tribunal analyzed the case and found that the respondent and M/s. Ador Fontech Ltd. were separate entities with different directors and registrations. The Commissioner (Appeals) concluded that different discounts to buyers were part of normal trade practice, known to the distributor in advance, and not solely for advertisement charges. Referring to a Supreme Court judgment in Kirloskar Brothers Ltd. v. UOI, the Commissioner justified the additional trade discount as not being solely attributable to advertisement charges, as M/s. Ador Fontech Ltd. was not under a specific obligation to advertise the products. The Tribunal concurred, ruling that the discounts were normal trade discounts and upheld the impugned order, dismissing Revenue's appeal.

The judgment highlights the importance of distinguishing between normal trade discounts and those specifically linked to additional expenses such as advertising. It emphasizes the need for clear documentation and communication regarding the purpose of any extra discounts to avoid disputes over the valuation of goods for customs duty purposes.