2017 (6) TMI 155 - AT - Central Excise

Interpretation of statute - Section 4A of the Act - Valuation - RSP valuation - quantity discount - whether the assessee is liable to pay duty on the quantity discount offered to dealers/distributes? - Held that - The taxability of, inter alia, quantity discount has also been reiterated by the CBEC in the circular dt. 30.06.2000 stating that discount of any type made known prior to clearance of goods to normal price subsequently and passed on to such customers is admissible deduction from transaction value - there is no such possibility in provisions of Section 4A ibid to allow for deduction of any such similar quantity discount. As mentioned earlier, there is no scope for reduction in the assessable value deemed to be equal to declared retail price. Only reduction permitted in the said section is that of abatement which would have to be specified/allowed by notification by Central Government. There is no scope for deducting the value of M.R.P goods which are supplied along with identical goods in the same packing as quantity discount - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Liability to pay duty on products offered as "quantity discount."
2. Applicability of Section 4A of the Central Excise Act, 1944.
3. Interpretation of previous judgments and their applicability to the current case.

Issue-Wise Detailed Analysis:

1. Liability to Pay Duty on Products Offered as "Quantity Discount":
The appellants cleared certain quantities of products as "quantity discount" without payment of duty, relying on previous judgments (Surya Food and Agro Ltd. Vs CCE Noida and Vinayaka Mosquito Coil Manufacturing Co. Vs CCE Bangalore) to argue that they were not liable to pay duty on these discounted products. However, the department issued a Show Cause Notice (SCN) for redetermination of assessable value, demanding duty on such goods. The original authority confirmed the duty demand, which was upheld by the Commissioner (Appeals).

2. Applicability of Section 4A of the Central Excise Act, 1944:
The main dispute hinged on the interpretation of Section 4A, which pertains to the valuation of excisable goods with reference to their retail sale price (M.R.P). The section specifies that the value for charging duty shall be the retail sale price declared on the goods, less any abatement allowed by the Central Government. The appellants argued that quantity discounts should be extended to valuation under Section 4A, similar to Section 4, where transaction value includes discounts known at or prior to clearance. However, the tribunal found that Section 4A does not allow for any deductions other than specified abatements, making it different from Section 4, which considers transaction value.

3. Interpretation of Previous Judgments and Their Applicability:
The appellants cited the judgment in Vinayaka Mosquito Coil Manufacturing Co., where the Supreme Court dismissed the department's appeal, arguing that this should apply to their case. However, the tribunal noted that the facts in Vinayaka were different; the free items were in the same packet with the M.R.P affixed, unlike the current case where free items were in separate packets with separate M.R.Ps. The tribunal also referenced the Larger Bench decision in Indica Laboratories Pvt. Ltd. Vs CCE Ahmedabad, which clarified that the concept of quantity discount under Section 4 does not apply to Section 4A. The tribunal also considered the Supreme Court judgment in CCE Bangalore Vs Himalaya Drug Company, emphasizing that M.R.P is the sole consideration for assessable value under Section 4A.

Conclusion:
The tribunal concluded that there is no scope for deducting the value of M.R.P goods supplied as quantity discounts under Section 4A. The appeal was dismissed, affirming that duty must be paid on the entire quantity, including goods given as quantity discounts, based on the M.R.P declared on the packages.