2018 (6) TMI 120 - AT - Central Excise

Valuation of free supply of medicines - Trade discounts - discounts allowed to customers - P & P medicaments - some quantities are given to their buyers as discount/free supply on which they are not paying duty and MRP also not mentioned on those units - Held that - The Ld. Commissioner (Appeals) has correctly observed that discounts in this case were extended on purely commercial considerations to the unrelated buyers and price was the sole consideration for sale in these transactions and hence denial of deduction on discounts not sustainable - Ld. Commissioner (Appeals) has examined the issue in detail and allowed the trade discount and there is no infirmity in the observation - appeal dismissed - Decided against Revenue.

Summary

Issues:
- Whether the duty was rightly demanded for the free quantity supplied by the respondents to their customers.
- Whether the discounts given by the appellants on account of free supplies and trade discount mentioned in the invoices were admissible for deduction from the transaction value.

Analysis:
1. Issue 1 - Duty Demand for Free Quantity Supplied:
- The case involved a dispute where the respondents supplied specific quantities of medicines packs for free along with the quantities of excisable goods charged for sales. The audit observed mis-declaration of free supplies as quantity discounts, contrary to provisions. The duty demand was confirmed against the respondents, which was later set aside by the Ld. Commissioner (Appeals). The Revenue appealed this decision.
- The Tribunal noted that the free supplies were not having any MRP and were given as discount/free supply to customers as part of the trade strategy. The Ld. Commissioner (Appeals) correctly observed that the free quantities were not paid for by the buyers and were given as quantity discount. The Tribunal upheld this view, citing relevant circulars and judicial precedents supporting the admissibility of quantity discounts in such cases.

2. Issue 2 - Admissibility of Discounts for Deduction:
- The appellants contended that the discounts given on free supplies and trade discount were not included in the transaction value, as clarified in Circular No. 354/81/2000-TRU. The Tribunal referred to the decision of the Supreme Court in CCE vs. Hindustan Lever Ltd., which held that quantity discounts are admissible for deduction under Section 4 of the Central Excise Act, 1944.
- Additionally, the Tribunal cited the case of Surya Foods & Agro Ltd. Vs. CCE, Noida, and Kothari Detergents (P) Ltd. v. Commissioner to support the admissibility of quantity discounts for deduction in the assessable value of excisable goods. The discounts were considered to be extended on purely commercial considerations to unrelated buyers, and the price was the sole consideration for sale, leading to the dismissal of the appeal by the Revenue.

In conclusion, the Tribunal upheld the decision of the Ld. Commissioner (Appeals) after detailed analysis of the issues related to duty demand for free quantity supplied and the admissibility of discounts for deduction from the transaction value. The judgment emphasized the commercial considerations and trade practices in determining the assessable value of excisable goods, ultimately dismissing the appeal filed by the Revenue.