2017 (3) TMI 767 - AT - Central Excise

Valuation - welding electrodes - notional interest - whether notional interest accruable on advance is includible in the assessable value? - Held that - Rule 6 of the Valuation Rules, 2000 contemplates for inclusion of any additional amount in the value of the goods sold if it is not included - where the assessee receives any advance payment from the buyer against the delivery of any excisable goods no notional interest shall be added unless the Central Excise officer has evidence to the effect that advance received has influenced the fixation of the price by way of charging lesser price from or by offering a special discount to the appellant buyer who has made the advance deposit. It is an admitted position in this case that appellant offered 5% cash discount to the dealers who made advance payment. On a specific query from the Bench as to whether the same 5% cash discount is offered to any other dealer who is not making any advance to make payment, Ld. C.A. fairly states that they did not extend this cash discount to those dealers who are not making advance payment. On this factual position we have to hold that Explanation 2 to Rule 6 categorically covers the issue as in the case in hand is against the appellant-assessee. Assessable value on which duty liability needs to be discharged is the after addition of the cash discount - appeal allowed - decided in favor of Revenue.

Summary

Issues:
Central excise duty on cash discount offered to dealers who made advance payments.

Analysis:
The judgment involved appeals against orders passed by the Commissioner/Commissioner (Appeals) regarding the liability of the assessee to pay duty on cash discounts extended to dealers making advance payments. The Revenue authorities issued show cause notices, leading to appeals by both the assessees and the Revenue. The issue revolved around the interpretation of Rule 6 of the Central Excise Valuation Rules, 2000, specifically concerning the inclusion of notional interest accruable on advance payments in the assessable value.

The appellant argued that the provision of Rule 6 did not apply to their case as they did not receive advance deposits but advance payments for the goods to be supplied, maintaining that the list price remained the same for all customers. The appellant contended that the cash discount did not reduce the value of the goods but was a permissible deduction. They relied on various judgments supporting their stance.

On the other hand, the Revenue argued that the Valuation Rules were clear, and the cash discount offered should be covered by Rule 6, Explanation 2. The Revenue emphasized the provision of Rule 6 and the fact that the appellant provided a 5% cash discount to dealers making advance payments.

The Tribunal analyzed Rule 6 and Explanation 2 of the Valuation Rules, emphasizing that no notional interest on advance payments should be added unless it influenced the price fixation. The Tribunal noted that the appellant extended a 5% cash discount only to dealers making advance payments, categorizing it as a special discount offer. The Tribunal rejected the appellant's attempt to differentiate between price and value, concluding that the assessable value for duty liability included the cash discount. Consequently, the assessee's appeals were rejected, and the Revenue's appeals were allowed.

In conclusion, the judgment clarified the application of Rule 6 of the Valuation Rules in determining the assessable value concerning cash discounts offered to dealers making advance payments, ultimately upholding the duty liability on such discounts.