2017 (1) TMI 1072 - AT - Central Excise

Natural justice - Valuation - discounts claimed by the Appellant had not been entirely passed on to the customers - deductions claimed wrongly - whether the Appellants are eligible to cash discount, and deductions on account of special packing charges and freight charges from the sale price, during the relevant period, in the determination of assessable value and discharge of duty? Held that - appellants have placed certain letters issued by the customers acknowledging the receipt of their business policy circulars where the percentage and nature of cash discount had been disclosed. Also, they have procured letters/ communication from various customers accepting knowledge about the percentage and nature of cash discount through business policy circular; these evidences need to be scrutinized by the learned Adjudicating Authority. Hence, for verification of these evidences, the issue needs to be remanded to the Adjudicating Authority. With regard to the deduction of expenditure on account of special packing charges, we could not find the said explanation as sufficient to arrive at the conclusion that the goods were cleared in special packing condition at the instance of the buyers so as to allow the expenditure as deduction from the price. In the result, the learned Commissioner s finding on special secondary packing is upheld. On the issue of deduction of freight charges, We find from the statements furnished for each of the Financial year in calculating the discounts availed and consequently the differential duty paid by the Appellant, the element of freight was shown on actual basis; also in their reply to the Show Cause Notice the same figures of actual freight charges incurred had been mentioned. However, its admissibility has to be considered on the basis of evidences even though in principle it is admissible in view of the judgment of Hon ble Supreme Court in the case of CCE&C, Nagpur Vs Ispat Ltd 2015 (10) TMI 613 - SUPREME COURT . Accordingly, this issue also requires to be remanded to the Adjudicating Authority for reconsideration. Appeal disposed off - matter on remand.

Issues Involved:
1. Admissibility of cash discount
2. Deduction on account of special packing charges
3. Deduction of freight charges
4. Limitation period for demand
5. Imposition of penalties

Issue-wise Detailed Analysis:

1. Admissibility of Cash Discount:
The appellants argued that the cash discount should be allowed as it was disclosed to customers through their business policy circulars and was claimed in their price declarations. They cited precedents such as Goodlass Nerolac Paints Ltd and Purolator India Pvt. Ltd. to support their claim. The Commissioner disallowed the cash discount on the grounds that the appellants failed to establish that the discount was made known to customers prior to the removal of goods, pointing to inconsistencies in the percentage of discounts declared. The Tribunal found merit in the appellants' argument and noted that they had produced additional evidence (letters from customers) indicating that the discount policy was known to customers. The Tribunal remanded this issue back to the Adjudicating Authority for verification of these new evidences.

2. Deduction on Account of Special Packing Charges:
The appellants claimed deductions for special packing charges, arguing that certain goods were specially packed at the request of customers. The Commissioner rejected this claim, finding that the purchase orders provided as evidence were issued after the delivery of goods and thus not genuine. The Tribunal upheld the Commissioner’s finding, noting that the appellants failed to provide sufficient evidence to substantiate their claim.

3. Deduction of Freight Charges:
The appellants contended that they claimed freight charges on an actual basis at the end of each financial year, despite initially declaring them as a percentage of the price. The Commissioner denied the deduction on the grounds that the appellants did not claim actual freight costs but rather a percentage. The Tribunal noted that the appellants had provided statements showing actual freight charges and cited the Supreme Court judgment in CCE&C, Nagpur Vs Ispat Ltd, which supports the admissibility of such deductions. This issue was also remanded to the Adjudicating Authority for reconsideration based on the evidence provided.

4. Limitation Period for Demand:
The appellants argued that the demand was barred by limitation as they had periodically informed the department of the discounts claimed and re-determined the assessable value at the end of each financial year. They cited several case laws to support their claim that there was no suppression of facts. The Tribunal did not explicitly address this issue in the judgment but implied that it would be reconsidered upon remand.

5. Imposition of Penalties:
The appellants contested the penalties imposed, arguing that the issue was one of interpretation of law and that they had followed the principles laid down by higher courts. They also argued that the personal penalties on their employees were unwarranted as their roles were not discussed in detail. The Tribunal decided not to express an opinion on the penalties at this stage, as the admissibility of cash discount and freight charges needed to be reexamined. The penalties would be reconsidered by the Commissioner after deciding on these issues.

Conclusion:
The Tribunal remanded the issues of cash discount and freight charges back to the Adjudicating Authority for further verification and reconsideration. The findings on special packing charges were upheld, and the consideration of penalties was deferred pending the outcome of the remand. The appeals were disposed of accordingly.

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