2011 (2) TMI 548 - AT - Central Excise

Refund - 100% E.O.U - respondents are engaged in the manufacture of leather finishing chemicals falling under Chapter heading Nos. 29, 32, 34, 38 & 39 of the Central Excise Tariff Act, 1985 - assessee revised its agreement with the dealers by splitting the 14% discount into 11% allowed at the time of clearance of the goods and the balance 3% to be allowed on receipt of payments from the dealers by the due date - Even though the assessments were not provisional, that itself could not disentitle the assessee from claiming the refund - After clearance and sale of goods on payment of duty with reference to the classification and price, indicated by the assessee at the time of removal, MRF had sought refund of duty paid on that part of the value which the Government had reduced retrospectively in its agreement for purchase from MRF Ltd - in an arms length transaction, conditions for payment & delivery remaining same, the value for assessment of excisable goods did not undergo change on introduction of the transaction value - assessable value of the excisable goods has all along been the total consideration received by the manufacturer of excisable goods from the buyer - Decided in favor of the assessee

Issues Involved:

1. Disclosure of intention to allow discounts and request for provisional assessment.
2. Passing on of duty incidence to dealers/customers.
3. Reliance on specific judicial precedents.
4. Timely payment discounts and their impact on assessable value.
5. Compliance with CBEC's Excise Manual of Supplementary Instructions.

Issue-Wise Detailed Analysis:

1. Disclosure of Intention to Allow Discounts and Request for Provisional Assessment:

The original authority rejected the refund claims because the assessee had not informed the department about the discounts allowed to dealers before the clearance of goods and had not requested provisional assessment. The Commissioner (Appeals) found this ground invalid and allowed the refund, relying on Tribunal decisions in similar cases. The Tribunal observed that failure to follow the instructions for provisional assessment does not disentitle an assessee from abatement of duty liability on such discounts, as long as the nature of the discount is known at the time of clearance and is irrevocably allowed to the customer.

2. Passing on of Duty Incidence to Dealers/Customers:

The Revenue argued that it was not known if the dealers had passed on the credit of duty initially paid to their customers, which is a requirement under Section 11B of the Central Excise Act, 1944. The Tribunal noted that this could be verified and that the refund should be subject to the test of unjust enrichment, ensuring that the incidence of duty had not been passed on to any other person.

3. Reliance on Specific Judicial Precedents:

The Revenue contended that the Commissioner (Appeals) erred in relying on the decision in Mahavir Spinning Mills Ltd., which was pending appeal before the Apex Court. However, the Tribunal noted that the decision in Mahavir Spinning Mills Ltd. had been affirmed by the Apex Court. The Tribunal also referenced other relevant cases, such as MRF Ltd. and Oriental Explosives Pvt. Ltd., to highlight that subsequent reductions in price after clearance and sale on payment of duty do not entitle the assessee to a refund.

4. Timely Payment Discounts and Their Impact on Assessable Value:

The Tribunal found that the timely payment discounts were known at the time of clearance and were irrevocably allowed to the dealers. The Tribunal cited the Supreme Court's observations in MRF Ltd. and Mahavir Spinning Mills Ltd., which established that discounts known at the time of clearance should be allowed, even if the exact amount is quantified later. The Tribunal emphasized that the assessable value of excisable goods is the total consideration received by the manufacturer, excluding any allowed discounts.

5. Compliance with CBEC's Excise Manual of Supplementary Instructions:

The Tribunal noted that the instructions in the CBEC's Excise Manual of Supplementary Instructions, 2005, regarding provisional assessment and disclosure of intention to allow discounts, are not mandatory conditions for granting refunds. The Tribunal found that the assessee's failure to follow these instructions upfront does not alone justify denying the refund, especially when the nature of the discount was known at the time of clearance and the discount was irrevocably allowed.

Conclusion:

The Tribunal rejected the appeal filed by the Revenue and upheld the decision of the Commissioner (Appeals) to allow the refund of the differential duty claimed by the respondents. The Tribunal directed that the impugned refund amounts be sanctioned subject to the test of unjust enrichment, ensuring that the incidence of duty had not been passed on to any other person. The judgment emphasized the importance of known and irrevocable discounts at the time of clearance and the non-includability of prompt payment discounts in the assessable value.

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