2017 (12) TMI 1089 - AT - Central Excise

Valuation - includibility - financial charge for release of payment immediately - case of department is that 1.9% discount given by appellant to Tata Motors Ltd. towards compensation of financial charges charged by their bankers for obtaining payment immediately is not a discount but an additional consideration received by the appellant - Held that - this discount is nothing but prompt payment discount - the appellant have admittedly passed on this discount to the buyer Tata Motors Ltd. in their invoice for clearance of goods. 1.9% expenses incurred by Tata Motors Ltd. is an arrangement between them and the banker. The appellant have extended this discount since they have received the prompt payment instead of waiting for 89 days. Therefore the discount extended by the appellant cannot be part and parcel of the assessable value and the deduction on that account is admissible under Section 4(1)(a). The discount of 1.9% cannot be included in the assessable value - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the 1.9% discount extended by the appellant to the buyer should be included in the assessable value.

Analysis:
The case involved the appellant clearing goods to Tata Motors Ltd. as per agreed prices, with Tata Motors releasing payment directly to the appellant after 89 days. To expedite payment, Tata Motors decided to issue a hundi for immediate payment, incurring a financial charge of 1.9%. The appellant then offered a 1.9% discount to Tata Motors to offset this charge. The dispute arose when the department argued that this discount constituted additional consideration, not a true discount, and should be included in the assessable value.

The Tribunal examined the nature of the discount and its purpose. It was established that the discount was provided by the appellant to facilitate prompt payment by Tata Motors, as opposed to waiting for 89 days. The Tribunal disagreed with the department's contention that the discount was an additional consideration, emphasizing that the discount was clearly passed on to Tata Motors and reflected in the invoice for goods clearance. Citing precedents like the Agzar Paints case, the Tribunal concluded that the discount was a prompt payment discount, deductible under Section 4(1)(a) and not part of the assessable value.

In support of their decision, the Tribunal referenced various judgments, such as the Antifriction Bearings Corporation Ltd. case, Pedder & Pedder Tiles Ltd. case, CCE Meerut v. Best Board Ltd. case, and West Cost Paper Mills Ltd. case. These cases highlighted that prompt payment discounts were permissible deductions from the assessable value, even if not all buyers availed themselves of the discount. Ultimately, the Tribunal ruled that the 1.9% discount should not be included in the assessable value, setting aside the impugned order and allowing the appeals.

Therefore, the judgment clarified that the discount offered by the appellant to Tata Motors was a prompt payment discount and not an additional consideration, making it deductible from the assessable value in line with established legal principles and precedents.