2016 (2) TMI 67 - AT - Central Excise

Refund - valuation - quantity discount given after clearance of goods from factory to their depot - Rule 7 - appellant argues that assessable value in such circumstances should be the assessable value arrived at when goods were sold from the depot to the independent customer i.e. the price after allowing the quantity discount. Held that - The price at which the goods are cleared from the factory to the depot does not become the assessable value for the purpose of assessment. The Revenue s reliance on the decision of MRF Ltd. (1997 (3) TMI 104 - SUPREME COURT OF INDIA) is not correct in so far as in that case the goods were cleared from the factory premises and not from the depot and therefore the facts are substantially different. If in this case during the period of dispute there were quantity discount schemes and the quantity discounts in the form of free quantity were given at the time of sale from depot the same would have to be allowed even if Central Excise invoices issued at the time of clearance of the goods from the factory do not mention the quantity discount as the same can be mentioned only when the goods are sold from the depot. Appeal is allowed with consequential benefit subject to necessary safeguards. - Decided in favor of assessee.

Issues Involved:
1. Determination of assessable value for goods cleared from factory to depot.
2. Applicability of quantity discount on assessable value.
3. Interpretation of Rule 7 of Central Excise Valuation Rules, 2000.
4. Relevance of the Supreme Court decisions in MRF Ltd. and Purolator India Ltd.
5. Application of Tribunal decision in Glenmark Pharmaceuticals Ltd.

Issue-wise Detailed Analysis:

1. Determination of Assessable Value for Goods Cleared from Factory to Depot:
The appellants, manufacturers of P&P Medicines, contended that the assessable value for goods cleared from the factory to the depot should be the value after offering quantity discounts to customers. They filed a refund claim based on this argument, which was rejected by lower authorities. The authorities relied on the decisions in MRF Ltd. and Camphor & Allied Products, as well as a CBE&C Circular dated 30.6.2000.

2. Applicability of Quantity Discount on Assessable Value:
The appellants argued that the assessable value should consider the quantity discount offered at the depot. They cited Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, which states that the value shall be the normal transaction value of such goods sold from the depot. The Tribunal decision in Glenmark Pharmaceuticals Ltd. supported this view, stating that quantity discounts known at the time of removal should be considered even if quantified later.

3. Interpretation of Rule 7 of Central Excise Valuation Rules, 2000:
Rule 7 specifies that when goods are not sold at the place of removal but transferred to a depot, the assessable value should be the transaction value at the depot. This rule aligns with Section 4(3)(c) of the Central Excise Act, 1944, which defines the "place of removal" to include depots. Therefore, the price at the depot, considering quantity discounts, should be the assessable value.

4. Relevance of the Supreme Court Decisions in MRF Ltd. and Purolator India Ltd.:
The lower authorities' reliance on MRF Ltd. was deemed incorrect as the case involved factory clearances, not depot clearances. The Tribunal distinguished the facts of MRF Ltd. from the present case. In Purolator India Ltd., the Supreme Court emphasized that the transaction value should be determined at the time of removal, whether from the factory or depot. The decision clarified that discounts known at the time of removal should be deducted from the sale price to determine the assessable value.

5. Application of Tribunal Decision in Glenmark Pharmaceuticals Ltd.:
The Tribunal found the present case similar to Glenmark Pharmaceuticals Ltd., where quantity discounts were allowed even if not mentioned in the Central Excise invoices at the time of factory clearance. The Tribunal held that what should be known is the discount policy, not the exact discount amount. The decision was remanded to the original adjudicating authority to verify the existence of a discount policy and ensure compliance with the judgment.

Conclusion:
The Tribunal concluded that the assessable value should be based on the transaction value at the depot, including quantity discounts. The reliance on MRF Ltd. was misplaced, and the principles from Purolator India Ltd. and Glenmark Pharmaceuticals Ltd. were applicable. The impugned order was set aside, and the appeal was allowed with consequential benefits, subject to necessary safeguards.

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