2016 (10) TMI 650 - AT - Central Excise

Deduction of Trade discount from Assessable value - Eligibility of Trade discount - three type of discounts (a) declared discounts to the dealers on goods sold to such dealers; (b) declared discounts to the dealers by way of credit note on sales arranged by such dealers; and (c) commission paid to consignment agents on sales made by them to independent buyers - Held that - these are transactions of sale by the appellants to the appointed dealers and discount on such sale, which was pre-declared in terms of the agreement, is clearly eligible for deduction. It is a fact that the said dealers also acted as agents in respect of arranged sales from the appellants to independent buyers for which the dealers were paid percentage as incentive. This apparently is an agency commission not to be considered as trade discount on sale of excisable goods. It is clear that such commission cannot be considered for discount in terms of legal provisions of Section 4 of the Central Excise Act - commission (claimed as trade discount ) paid to such agents/dealers for arranged sales to third parties will not be eligible for deduction. Time limitation - Appellants did not respond for certain queries and certain declarations now produced by the appellants did not bear the stamp of the office - the present notices were issued on scrutiny of records maintained by the appellants which included the declarations and returns filed by the appellants with the Department from time to time - Appeal is disposed of.

Summary

Issues:
1. Eligibility of deduction of trade discount from the sale price of depot.
2. Nature of agreements between the appellants and dealers.
3. Classification of discounts as commissions or trade discounts.
4. Invocation of extended period for demand.

Analysis:
1. The appeals revolved around the eligibility of the appellants to claim a deduction of trade discount on excise duty calculations. The dispute arose due to discrepancies in the treatment of discounts in commercial and excise invoices. The lower authorities initially disallowed the deductions, leading to a series of appeals and remands. The final order by the Commissioner of Central Excise, Jalandhar, addressed the issue along with another appeal against the Commissioner (Appeals) on the same matter.

2. The nature of agreements between the appellants and dealers was a crucial aspect of the case. The appellants argued that the dealers acted as buyers for resale and as agents for arranging sales. The agreements were analyzed to determine the roles of the dealers, with specific emphasis on declared discounts, credit notes, and commissions paid to consignment agents. The Tribunal examined sample agreements and invoices to ascertain the transactions' nature, highlighting the pre-declared discounts eligible for deduction.

3. The classification of discounts as commissions or trade discounts was a key point of contention. The Tribunal differentiated between discounts given on direct sales to dealers and commissions paid to agents for arranged sales to independent buyers. It upheld the disallowance of commission as a trade discount, emphasizing legal provisions under Section 4. The decision was based on the agreements, invoices, and the parties' roles in the transactions.

4. The invocation of the extended period for demand was strongly contested by the appellants. Declarations under Rule 173C(3A) were regularly filed, indicating compliance with requirements. Despite challenges in verifying records for the relevant period, the Tribunal noted the appellants' consistent submissions and agreements. It concluded that the demand for the extended period was not sustainable, considering the appellants' compliance with statutory obligations and the lack of conclusive evidence supporting the invocation.

In conclusion, the Tribunal ruled in favor of the appellants regarding the eligibility of trade discounts, clarified the classification of commissions, and set aside the demand for the extended period. The judgment provided detailed analysis on the issues raised, emphasizing legal interpretations, factual evidence from agreements and invoices, and compliance with statutory requirements.