2012 (11) TMI 534 - AT - Central Excise

Waiver of pre-deposit - Transaction value discount - assessee are giving 10% to 20% discount to their sales agents Held that - Sale associate/agents are getting a higher discount compared to the buyers who directly buy from the appellant manufacturer - sales associates/agent are rendering certain services to the appellant manufacturer and it is on account of these services, they are getting a higher discount - discounts given to the sales agents cannot be completed abated while determining the transaction value - To what extent these discounts should be included in the transaction value can be decided only after examining the issue in depth - appellant directed to make a pre-deposit of 50% of duty.

Issues involved:
- Whether discounts given to sales agents should be included in the assessable value for the purpose of levy of excise duty.
- Whether the discounts granted to sales agents are in the nature of commission.
- Whether the appellant is entitled to abatement towards trade discounts allowed to the agents.
- Whether the sales agents are providing after-sales services on behalf of the manufacturer.
- Whether the appellant has made out a case for a complete waiver of the dues adjudged.

Analysis:

1. Inclusion of Discounts in Assessable Value:
The appellant, a manufacturer of goods, provided discounts ranging from 5% to 15% to customers and a higher discount of 20% to sales agents. The department contended that these discounts were actually commission and should be included in the assessable value for excise duty purposes. The appellant argued that the discounts were trade discounts reflected in invoices and should be considered in the transaction value. The Tribunal noted that the sales agents were providing post-clearance services on behalf of the manufacturer, justifying the higher discount. The Tribunal held that the discounts given to sales agents cannot be completely abated in determining the transaction value, directing the appellant to make a pre-deposit of 50% of the confirmed duty.

2. Nature of Discounts and Commission:
The appellant admitted to providing discounts to sales agents for various services, including convincing customers, following up for timely delivery, order amendments, collecting payments, and after-sales services. The department argued that these discounts were akin to commission and should be part of the assessable value. The Tribunal distinguished previous judgments related to after-sales services, stating that in this case, the sales agents were compensated for services rendered through higher discounts, not providing services for free. The Tribunal held that the discounts were not to be completely abated in the transaction value calculation.

3. After-Sales Services by Sales Agents:
The department contended that sales agents were providing after-sales services on behalf of the manufacturer, justifying the higher discount given to them. Statements from the accounts manager of the appellant company and a sales agent confirmed that services were being rendered by the sales agents. The Tribunal acknowledged the services provided and the compensation through higher discounts, leading to the decision not to completely abate the discounts in the transaction value calculation.

4. Entitlement to Abatement and Waiver of Dues:
The appellant sought complete waiver of the dues adjudged, citing judgments related to trade discounts and after-sales services. However, the Tribunal found that the discounts given to sales agents could not be fully abated in the transaction value calculation. The Tribunal directed the appellant to make a pre-deposit of 50% of the confirmed duty, with the balance waived upon compliance, staying the recovery during the appeal's pendency.

In conclusion, the Tribunal ruled that the discounts given to sales agents, reflecting compensation for services rendered, should not be entirely abated in determining the transaction value for excise duty calculation, requiring a partial pre-deposit from the appellant.

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