2016 (3) TMI 664 - AT - Central Excise

Eligibility of quantity discount - determination of correct sale value - transaction value - deceleration of quantity discount before the sale of the goods from the place of removal i.e. Depot and discount was shown in the sale invoice - Held that - Transaction value as defined in sub-clause (3)(d) of Section 4 has to be read along with the expression for delivery at the time and place of removal . It is clear, therefore, that what is paramount is that the value of the excisable goods even on the basis of transaction value has only to be at the time of removal, that is, the time of clearance of the goods from the appellant s factory or depot as the case may be. The expression actually paid or payable for the goods, when sold only means that whatever is agreed to as the price for the goods forms the basis of value, whether such price has been paid, has been paid in part, or has not been paid at all. The basis of transaction value is therefore the agreed contractual price. Further, the expression when sold is not meant to indicate the time at which such goods are sold, but is meant to indicate that goods are the subject matter of an agreement of sale. Once this becomes clear, what the learned counsel for the assessee has argued must necessarily be accepted inasmuch as cash discount is something which is known at or prior to the clearance of the goods, being contained in the agreement of sale between the assessee and its buyers, and must therefore be deducted from the sale price in order to arrive at the value of excisable goods at the time of removal . In view of our above observation on facts and settle legal position of law, we are of the considered view that quantity discount was correctly claimed by the appellant as the same was claimed at the time of sale of the goods.

Summary

Issues:
1. Disallowance of quantity discount by Revenue.
2. Determination of transaction value for excisable goods.
3. Interpretation of legal provisions regarding discount schemes.

Analysis:
1. The appeal challenged the rejection of quantity discount by the Commissioner of Central Excise(Appeals) based on the grounds that the discount scheme should be predetermined before clearance of goods from the factory. The appellant argued that the goods were initially transferred to the depot, not for sale, and the discount was provided at the time of actual sale through distributors. The Revenue contended that the discount should have been known prior to factory clearance. The Tribunal noted the factual sequence and concluded that the discount was declared before the sale, supporting the appellant's case.

2. The Tribunal delved into the definition of "transaction value" under the Central Excise Tariff Act, emphasizing that the actual amount payable by the buyer at the time of sale determines the transaction value. Citing the case law of Purolator India Ltd Vs. Commissioner of Central Excise, Delhi III, the Tribunal clarified that the transaction value must be determined at the time of removal from the factory or depot. The judgment highlighted the significance of the agreed contractual price and the deduction of known discounts to arrive at the excisable goods' value at the time of removal.

3. In analyzing the legal provisions and precedents, the Tribunal emphasized that the discount claimed by the appellant was correctly done at the time of sale, as per the agreement with buyers. Referring to the settled legal position, the Tribunal set aside the impugned order and allowed the appeal, affirming the appellant's entitlement to claim the quantity discount. The judgment underscored the importance of determining the value of excisable goods at the time of sale and the relevance of known discounts in calculating the transaction value accurately.