2016 (9) TMI 233 - AT - Central Excise

Valuation - Permissibility of various types of discounts when goods are cleared from the Depot after payment of duty from the factory gate - valuation rules do not debar the grant of cash discount, quantity discount etc. even under above situation - Held that - there is no dispute that the fact that various types of discounts are being allowed is very well-known. The fact that the discounts are being given is known but the quantum is not determinable at the time of clearance of goods from the factory. This is the main reason why provisional assessments have been resorted to. We also see that this issue is fairly well settled through various decisions of the Tribunal, Hon ble High Courts and even the Apex Court. In the present case the place of removal is not the factory gate but the depot of the appellant. Under such circumstances the discounts allowed in the price contracted for sale from the depot would be allowable as a deduction from such price. - Decided in favour of appellant with consequential relief

Summary

Issues Involved:
- Challenge against the order of the Commissioner (Appeals) regarding the deduction of discounts on goods sold from the depot after clearance from the factory gate.

Analysis:
1. The appellant, a manufacturer of wires and cables, filed an appeal against the order of the Commissioner (Appeals) concerning the provisional assessment of discounts claimed on goods sold from the depot after clearance from the factory gate. The appellant contended that valuation rules do not restrict the grant of discounts even when goods are cleared from the depot after payment of duty at the factory gate. The appellant cited various case laws supporting their position on the permissibility of discounts in such scenarios.

2. The appellant argued that the issue of granting discounts upon clearance from the depot after payment of duty from the factory gate is well-established in their favor. They referenced several case laws, including Biochem Pharmaceuticals Industries, Glennmark Pharmaceuticals Ltd., and Tecumesh Products India, to support their claim. The appellant emphasized that discounts should be allowable regardless of the place of clearance, be it the factory gate or the depot.

3. During the hearing, the appellant's counsel and the revenue's representative presented their arguments. The appellant's counsel highlighted the settled legal position in favor of granting discounts on goods sold from the depot after clearance from the factory gate. The revenue's representative referred to a previous Tribunal decision where the matter was remanded due to the unavailability of documentary evidence on discount quantification.

4. The Tribunal examined the circumstances where goods are duty paid at the factory gate but later transferred to the depot for sale. It was noted that Section 4(1)(a) of the Central Excise Act does not apply in such cases as there is no sale at the time of initial clearance to the depot. Rule 7 of the Valuation Rules governs such scenarios, allowing for the deduction of discounts based on the normal transaction value of goods sold from the depot.

5. The Tribunal emphasized that discounts should be granted based on the agreed contractual price, even if not explicitly passed on to buyers. Various legal precedents, including the Purolator case, supported the allowance of discounts on the normal transaction value from the place of removal, which, in this case, was the appellant's depot. Therefore, the Tribunal allowed the appeal, setting aside the impugned order and granting consequential relief to the appellant.

This comprehensive analysis of the judgment highlights the key arguments, legal interpretations, and precedents considered by the Tribunal in reaching its decision to allow the appeal and provide relief to the appellant.