2017 (8) TMI 773 - AT - Central Excise

Valuation - discount/commission - includibility - It is the case of the Revenue that this amount deducted as trade discount is nothing but commission while it is the case of the assessee-appellant that the amounts disputed are discount - whether discount/commission given to the sales agent is to be included in the assessable value? - Held that - One transaction of the sales is regarding direct sale to the customers which is executed and overriding commission is paid to the sales agent in the area and such commission is included in the assessable value for discharge of Central Excise duty. There is no demand of duty on these transactions. The second set of transactions is that the appellant sells their product directly to the sales agents. Appellant insists trade discount of 10%/20% on these transactions to the traders who purchases the goods from the appellant and market the same on their own in their area. This transaction is in dispute. There cannot be any dispute as to the fact that the sales agent can definitely function in dual role one as a commission agent and seller of the appellant s product. The lower authority seems to have confused with the entire issue by mixing up both the sales transaction - 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. 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. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Determining whether the amounts deducted by the appellant as trade discount from the invoices issued to the sales agent should be considered as commission or discount for the purpose of Central Excise duty calculation.

Analysis:

1. Issue of Discount vs. Commission:
The case involved the appellant, engaged in manufacturing excisable goods, selling products directly to customers and through sales agents. The dispute arose regarding the treatment of discounts given to sales agents - whether they should be considered as commission or discount. The Revenue argued that the discounts were essentially commission for after-sales services. The appellant contended that the discounts were genuine trade discounts. The Tribunal analyzed the transactions, distinguishing between direct sales to customers and sales to agents for resale. The Tribunal noted that the sales agents acted as both commission agents and sellers of the appellant's products. The Tribunal relied on statements from the Accounts Manager and dealers to establish the nature of transactions, emphasizing that the discounts were part of principal-to-principal sales.

2. Legal Precedents and Interpretation:
The appellant cited legal precedents, including the Supreme Court's decision in TVS Motors Co. Ltd., to support their argument that amounts paid for after-sales services should not be included in the assessable value for Central Excise duty calculation. The Tribunal considered the applicability of Section 4 of the Central Excise Act, both pre and post 1-7-2000, to determine the eligibility of deductions for discounts offered to sales agents. Relying on the TVS Motors case and the Philips India case, the Tribunal concluded that the appellant was entitled to claim deductions for discounts paid to sales agents, both before and after 1-7-2000.

3. Assessment of Transactions Post-1-7-2000:
The Tribunal examined the transactions post-1-7-2000 under Section 4 of the Central Excise Act, which levies duty on transaction value. It noted that the appellant issued invoices to sales agents indicating trade discounts, discharged duty liability accordingly, and found no evidence of additional payments by sales agents. The Tribunal held that each sales invoice constituted a separate transaction, and Central Excise duty was payable only on amounts received for those invoices. Consequently, the Tribunal ruled that the demand for duty in the impugned orders was unsustainable and set them aside.

4. Conclusion and Relief Granted:
The Tribunal allowed the appeals, setting aside the impugned orders and providing consequential relief. By analyzing the nature of transactions, legal precedents, and relevant provisions of the Central Excise Act, the Tribunal determined that the discounts offered to sales agents were genuine trade discounts and not commission for after-sales services. The decision highlighted the importance of distinguishing between different types of sales transactions and correctly interpreting the provisions of the law to determine the assessable value for Central Excise duty calculation.

This detailed analysis of the judgment showcases the Tribunal's thorough examination of the issues involved and the legal principles applied in reaching a decision.