2011 (6) TMI 548 - AT - Central Excise

Disallowance of deduction on account of cash discount - appellants are not contesting the demands confirmed for the period after 01/07/2000 but they are contesting the confirmation of demands for the period prior to 01/07/2000 and submitted that prior to 01/07/2000 the appellants are entitled for deduction on account of cash discount from the assessable value as per the old valuation rules Held that - In the case of H & R Johnson (India) Ltd. (1999 - TMI - 91407 - CEGAT, MADRAS - Central Excise), the Hon ble apex court has held that the cash discount is deductible from the assessable value across the board and is not restricted only to those transactions where the individual buyers have availed of the discount. appellants are entitled for deduction on account of cash discount from the assessable value for the period prior to 01/07/2000 and is not entitled for the deduction on account of cash discount from the assessable value for the period post 01/07/2000. appeal is disposed of by way of remand.

Summary

Issues:

1. Disallowance of deduction on account of cash discount from assessable value.
2. Claim of deduction on account of cash discount for the period prior to 01/07/2000.

Analysis:

1. The appellants filed an appeal against the disallowance of the deduction on account of cash discount from their assessable value. The appellants, who manufacture excisable goods, had claimed various deductions including cash discount in their price declaration. However, it was observed that the cash discount claimed was not passed on to the customers. A show-cause notice was issued for the period December 1997 to September 2002, and demands were confirmed by lower authorities. The appellants contested the confirmation of demands, leading to the appeal.

2. The appellants argued that they are entitled to a deduction on account of cash discount from the assessable value for the period prior to 01/07/2000 as per the old valuation rules. They relied on the case law Commissioner of Central Excise, Bangalore vs. H & R Johnson (India) Ltd., which was confirmed by the Supreme Court. On the contrary, the Departmental Representative cited a Bombay High Court case and another Tribunal case, emphasizing that the discount is deductible only if given under terms of sale or trade practice, known before the removal of goods, and actually passed on to the buyers.

3. After considering the arguments and case laws presented by both sides, the Tribunal referred to the decision of the Hon'ble Supreme Court in the case of H & R Johnson (India) Ltd. The Supreme Court held that cash discount is deductible from the assessable value across the board, not limited to transactions where individual buyers have availed the discount. Following this precedent, the Tribunal ruled that the appellants are entitled to a deduction on account of cash discount from the assessable value for the period prior to 01/07/2000 but not for the period post that date.

4. Consequently, the matter was remanded to the original adjudicating authority to re-quantify the demands in accordance with the Tribunal's decision. The appeal was disposed of based on the above observations, with the operative part pronounced in court.