2017 (2) TMI 56 - AT - Central Excise

Valuation - deduction of trade discount from the invoices issued to the sale agent - Adjudicating authority disallowed discount given by the appellant to the sales agent is nothing but commission - Held that - even if these discounts offered by the appellant to the sales agent in a transaction on sale of principal to principal basis is towards rendering of certain services which at the most can be called as after sale services - reliance placed in the case of TVS Motors Co. Ltd. 2015 (12) TMI 874 - SUPREME COURT , where it was held that any amounts paid for after sale services cannot be included in the assessable value either pre or post 01.07.2000 as per the provisions of Section 4 of Central Excise Act, 1944. In the case in hand there is no dispute as to the fact that the appellant raises invoice on the sales agent indicating trade discount 10% to 20% and discharges the duty liability. There is nothing on record to show that the sales agents in respect of 2nd set of transactions has paid any further amount in respect of these transactions to appellant. In the absence of any evidence, each and every sales invoices raised by the appellant could be a separate transaction and Central Excise duty is payable on the amounts received for such invoices. The demand of duty as raised by the various impugned orders are unsustainable and liable to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over inclusion of discount/commission in assessable value for excisable goods.
- Interpretation of sales transactions directly to customers and through sales agents.
- Applicability of duty on trade discount to sales agents.
- Pre and post 01.07.2000 sales transactions distinction.
- Legal precedent on inclusion of after-sales service charges in assessable value.

Analysis:

The appellant filed appeals against orders-in-appeal by the Commissioner of Central Excise, Mumbai, regarding the inclusion of discount/commission in assessable value for excisable goods. The appellant's sales involved direct sales to customers and sales through appointed sales agents. The dispute centered around whether discounts given to sales agents should be considered as commission. The lower authorities and the appellant presented conflicting interpretations of the sales transactions. The appellant contended that discounts to sales agents were not commission but trade discounts. The appellant argued that sales directly to customers and sales to sales agents were distinct transactions. The appellant relied on legal precedents to support their position, emphasizing the nature of the sales transactions and the eligibility of deductions for discounts given to sales agents.

The appellant highlighted the distinction between pre and post 01.07.2000 sales transactions, asserting that duty should be paid based on transaction value. The appellant cited statements from company representatives and legal rulings to support their claim that discounts to sales agents were not subject to duty. The appellant referenced the Apex Court's decision in TVS Motors Co. Ltd., emphasizing that amounts paid for after-sales services should not be included in the assessable value. The appellant argued that the discounts offered to sales agents were for services rendered and should not be taxed as commission.

The Tribunal analyzed the transactions and found that the sales to sales agents were on a principal-to-principal basis, distinct from sales to customers through agents. The Tribunal noted that the discounts offered by the appellant to sales agents could be considered as after-sales services, which were not taxable as per legal precedents. The Tribunal held that the demand for duty on the discounted amounts was unsustainable and set aside the impugned orders. The Tribunal ruled in favor of the appellant, allowing the appeals with consequential relief. The judgment was pronounced in court on 12/01/2017.