2019 (1) TMI 908 - AT - Central Excise

Valuation - quantum of discount to be reduced - It was contended by the Department that the appellants are remunerating the re-sellers with 1% trade discount included in the 30% trade discount. The effective trade discount is only 29% and 1% being the remuneration for the services rendered by the re-sellers appears to be in the form of a commission and not a trade discount. - Section 14 of the Customs Act read with Rule 3 of the Customs Valuation Rules, 1988 - extended period of limitation. Held that - These discounts are not in the nature of discounts as understood in the common parlance. They are directly or indirectly an expenditure to the appellants. The remuneration due to the wholesalers is given in the form of discounts. Therefore, these add to the cost of the products that the appellants are selling. More so, in respect of the EHTP unit the clearances made to the wholesalers in the domestic market are in the nature of imports by the wholesalers - Therefore, all the amounts paid or payable by the wholesalers form part of the transaction value for the purpose of the wholesalers in terms of Section 14 of the Customs Act, 1962. Whether the 3 SCNs under consideration are barred by limitation? - Held that - The appellants have been regularly filing their monthly ER-1 Returns indicating the quantities of computers manufactured and cleared every month, the details of invoices raised during the said month and the total value of clearances affected during the month in question. Department has already issued a SCN dated 26.03.2001 for the period April 1999 to Sept. 2000 to the appellants for the very same issue - when the Department is quite aware of the activities of the appellants, no suppression, nonetheless of a material fact with intent to evade payment of duty can be alleged - the SCNs are barred by limitation. Matter remanded back to the Original Authority for confirmation of duty for the normal period.

Summary

Issues Involved:
1. Whether the additional discount of 1% provided by the appellants to resellers is includible in the assessable value of the goods cleared by the appellants under the new Section 4 of CEA, 1944 post 1.7.2000.
2. Whether the 3 SCNs under consideration are barred by limitation.

Issue-wise Detailed Analysis:

1. Includibility of Additional Discount in Assessable Value:
The appellants argued that the additional discount of 1% provided to resellers should not be included in the assessable value under the new Section 4 of the Central Excise Act (CEA), 1944, which emphasizes the 'transaction value'. They contended that the agreements post-1.7.2000 reflect this discount as part of the net realization from customers, which forms the basis for levy of duty. The appellants highlighted changes in the agreements effective from 1st April 2001, emphasizing that the 1% discount was for providing inventory reports and was included upfront in the reseller’s discount.

The Tribunal, however, found that there was no material change in the agreements before and after 1.7.2000 regarding the provision of discounts. Both agreements indicated that the appellants would remunerate the wholesalers for providing reports. The Tribunal referred to the appellant’s own case (2003 (162) ELT 399 (Tri-Bang)), where it was held that the compensation given to wholesale buyers for additional services was a commission and not a trade discount. This decision was upheld by the Supreme Court. The Tribunal concluded that the 1% discount was not in the nature of a trade discount but a remuneration for services rendered by the dealers, which should be included in the assessable value.

2. Limitation Period for SCNs:
The appellants argued that the SCNs issued on 14.09.2005 and 27.01.2010, covering periods from April 2001 to November 2002 and January 2005 to March 2008, respectively, were barred by limitation as they were issued well after three years. They contended that the Department was already aware of the facts since a similar issue was raised in an earlier SCN dated 26.03.2001 for the period April 1999 to September 2000. The Tribunal agreed with the appellants, citing the Supreme Court's decision in Nizam Sugar Factory (2006 (197) ELT 465), which held that suppression of facts cannot be alleged when the Department is already aware of the facts. As the Department had issued a SCN on the same issue for an earlier period, the extended period of limitation could not be invoked for subsequent SCNs.

Conclusion:
The Tribunal held that the additional discount of 1% provided by the appellants to resellers is includible in the assessable value of the goods under the new Section 4 of CEA, 1944. However, the SCNs issued on 14.09.2005 and 27.01.2010 were barred by limitation. The demand in respect of Appeal No. E/1045/2009 was upheld for the normal period, while the demands in respect of Appeals No. E/503/2007 and E/885/2011 were allowed in toto on limitation.

Order:
The appeal No. E/1045/2009 was partly allowed and remanded back to the Original Authority for confirmation of duty for the normal period. Appeals No. E/503/2007 and E/885/2011 were allowed in toto on limitation.