2017 (9) TMI 1177 - AT - Central Excise

Valuation - abatement - Discount to wholesalers for damages suffered during transit - department entertained a view that such discount on account of damages to goods cannot be deducted from the assessable value - Held that - since the discounts have been disclosed in the price list, they are deemed to be known to the trade/wholesale buyer prior to the removal of goods - Merely because the appellants did not produce any written agreement, it cannot be said that the trade discount is not known to the buyer at the time of removal of goods. Such discounts are usually given under mutual understanding between parties - appellants are eligible for deduction of trade discount for damaged goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility to deduct trade discount on damaged goods while computing assessable value under Rule 173C of Central Excise Rules, 1944.

Analysis:

Issue 1: Eligibility to deduct trade discount on damaged goods
The case involved the appellants, manufacturers of 'Toilet Soaps,' who filed price declarations under Rule 173C claiming abatement of "Discount to wholesalers for damages suffered during transit" from the price list to determine the assessable value for duty purposes. The department disputed this deduction, leading to a Show Cause Notice for demanding differential duty. The original authority and the Commissioner (Appeals) upheld the duty demand, prompting the appeal. The appellant's counsel argued that the Tribunal had previously ruled in the appellant's favor regarding the eligibility to deduct trade discount for damaged goods. The Tribunal's earlier order was challenged by the department in the Supreme Court, which upheld the Tribunal's decision, affirming the appellant's right to claim the deduction.

Issue 1 Analysis Continued:
During the appeal, the appellant contended that the discount on damaged goods was a common trade practice followed by the company for twenty-five years. The appellant's responsibility to ensure safe delivery to buyers necessitated such discounts, which were disclosed in the price list and known to wholesale buyers before goods were dispatched. Despite the absence of a written agreement, the practice of offering trade discounts on damaged goods was established from records and mutual understanding between parties. The Tribunal found that the trade discount issue was settled by the Supreme Court in the appellant's prior case, supporting the appellant's contention. Consequently, the Tribunal held the demand for differential duty as unsustainable, setting aside the impugned order and allowing the appeal with any consequential relief as per the law.

This judgment reaffirms the importance of trade practices, mutual understanding between parties, and legal precedents in determining the eligibility to deduct trade discounts on damaged goods for computing the assessable value under relevant excise rules.