2012 (7) TMI 837 - AT - Central Excise

Valuation of goods - Inclusion of 1% discount in assessable value - Department contends that 1% amount was not in the nature of trade discount under the provisions of Customs Valuation Rules read with Section 14 of Customs Act, 1962 - Held that - The Agreement clearly distinguishes resellers and volume distributors. Resellers have been defined to be persons who are purchasing from volume distributors. These terms resellers and volume distributors are special terms used by the appellants in their Agreement. Prima facie, we agree with the submissions on behalf of the department that the activities of the so-called resellers/volume distributors have remained the same as in the previous case which has been decided against the appellant. The additional amount of 1% is extended to the volume distributors in view of their activities by way of helping the appellants by furnishing certain reports and market intelligence. We, prima facie, agree with the view of the department that the said amount represent remunerations for additional services rendered by the volume distributors/resellers. Since there is a deliberate change in the nomenclature relating to the dealers and the remuneration paid to them, prima facie, the invoking of extended period of limitation in the present case is also justified - Conditional stay granted.

Summary

Issues:
1. Whether the 1% special additional discount provided to resellers qualifies as a trade discount under Customs Valuation Rules.
2. Validity of the demand confirmed by the original authority along with interest and penalty.
3. Applicability of previous disputes and judgments regarding exclusion of amounts paid as remuneration to resellers.
4. Change in terms of contract by renaming dealers/distributors as resellers/volume distributors.
5. Justification for invoking the extended period of limitation in the present case.

Analysis:
1. The appellant provided a 1% special additional discount to resellers for specific obligations, which the department contended was not a trade discount under Customs Valuation Rules. The department recovered incriminating documents and statements, leading to a demand of Rs. 1,88,45,110/- confirmed by the original authority. The Tribunal agreed with the department that the amount represented remuneration for additional services by resellers, justifying the extended period of limitation.

2. The learned advocate argued that previous disputes and judgments regarding remuneration to resellers were not applicable to the present case, emphasizing the special discount nature. The department, supported by the Commissioner (AR), maintained that the change in terms of contract to resellers/volume distributors did not alter the substance of the transactions, warranting the extended period of limitation.

3. The Tribunal examined the Agreement terms distinguishing resellers and volume distributors, noting the activities remained similar to the previous case. The 1% additional amount was deemed remuneration for services rendered by resellers. Due to the deliberate change in nomenclature and remuneration, the extended period of limitation was justified, leading to a directive for the appellant to deposit the duty amount within six weeks.

4. In the absence of a plea of financial hardship, the Tribunal directed the appellant to deposit the duty amount of Rs. 1,88,45,110/- and report compliance within a specified timeline, with a waiver of pre-deposit of the penalty imposed and a stay on recovery pending appeal disposal. The decision was pronounced and dictated in open court by the Members.