2017 (2) TMI 938 - AT - Central Excise

Valuation - discount given to buyers - whether the quantity discount availed by the appellant in respect of clearance made to their own depot, allowed? - Held that - Quantity discount is an admissible discount provided the same is known prior to clearance or removal and if it is passed on to the buyers in terms of Section 4 of the Central Excise Act, 1944 and the discount have been passed on. The first condition to avail the quantity discount that it is known prior to the clearance is fulfilled, the second condition that the same is passed on to the buyers is not fulfilled in the instant case - discount not allowed - appeal dismissed - decided against appellant.

Summary

Issues:
- Admissibility of quantity discounts in clearance to own depots
- Interpretation of Section 4 of the Central Excise Act, 1944

Analysis:
The case involved the appellant, a company clearing goods to their own depot and claiming quantity discounts. The appellant filed declarations mentioning selling goods at wholesale price to dealers and transferring stock to depots. The issue arose when the authorities sought to deny the quantity discounts claimed by the appellant for clearances made to their own depot, as there was no actual sale involved at the time of clearance. Three show-cause notices were issued, and the demands were confirmed by lower authorities, leading the appellants to appeal before the Tribunal.

The appellant's counsel argued that quantity discounts were admissible, citing precedents such as the BUDGE BUDGE CO. LTD. case and decisions by the Hon'ble Apex Court in various cases like Century Laminating Co. Ltd. and Elgi Equipments Ltd. The counsel emphasized that the discounts were known prior to clearance and should be considered in the assessment. On the other hand, the AR relied on the impugned order, supporting the denial of quantity discounts for clearances to own depots.

After considering the submissions, the Tribunal noted that quantity discounts are admissible if known prior to clearance and passed on to buyers. However, in the case of clearances to own depots, where no actual sale occurs at the time of clearance, the discount is not passed on to buyers who purchase at retail prices from the depot. While the first condition for availing quantity discounts was met, the second condition of passing on the discount to buyers was not fulfilled in this scenario. Consequently, the Tribunal held that quantity discounts could not be claimed by the appellant for clearances to their own depot, as there was no incentive to self. Thus, the appeal was dismissed, with the judgment pronounced on 19.01.2017.