2019 (2) TMI 1239 - AT - Central Excise

Valuation - inclusion of value of cash discount not availed by the buyers in assessable value - case of the department is that the cash discount which was not availed by the buyers is part and partial of the transaction value - Held that - Cash discount is additional discount that in case the buyer make the payment within 4 days from the date of sale, 2% discount is given and in case payment is made in 14 days, 1% discount is given. Being conditional discount operated only when time line given, but the discount is not given to if the payment is not made within the stipulated time i.e. 4 days or 14 days, as the case may be, the scheme of discount is not operated, in such a case - Amount of discount initially offered by the appellant, which was subsequently paid by the buyer shall become part and partial of transaction value falling under the definition of transaction value given in Section 4 of Central Excise Act 1994. Cash discount which is not at or prior to clearance of goods being contained in agreement of sale between assessee and buyers must, therefore, be deducted from sale price in order to know the value of excisable goods at time. Hence, cash discount was deductible. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of transaction value under Section 4 of the Central Excise Act, 1994
- Inclusion of cash discount not availed by buyers in the transaction value
- Applicability of excise duty on the discounted price

Interpretation of Transaction Value:
The case involved a manufacturer of writing and printing paper registered with Central Excise, who faced a demand for excise duty due to the treatment of cash discounts not availed by buyers as part of the transaction value. The appellant had a cash discount policy where discounts were offered for prompt payment. The appellant contended that duty should be paid only on the discounted price, as per Section 4 of the Central Excise Act, 1994. The appellant argued that the price payable at the time of sale was the discounted price, and therefore, only that price should be considered the transaction value. The appellant cited various judicial precedents supporting their interpretation.

Inclusion of Cash Discount in Transaction Value:
The Revenue, represented by a Superintendent, maintained the findings of the impugned order, asserting that the cash discount not availed by buyers should be considered part of the transaction value. The Tribunal analyzed the nature of the cash discount, noting that it was conditional and operated only when the payment was made within the stipulated time frame. The Tribunal concluded that if the discount was not availed due to late payment, the discount amount became payable and should be included in the transaction value under Section 4(3)(d) of the Central Excise Act, 1994.

Applicability of Excise Duty on Discounted Price:
After considering the arguments from both sides and examining the relevant legal provisions, the Tribunal found that the discount amount not availed by buyers should indeed be included in the assessable value. Citing the Supreme Court judgment in the case of Purolator India Ltd., the Tribunal emphasized that the transaction value should be determined at the time of clearance of goods from the factory or depot. The Tribunal held that the cash discount, even if not paid at the time of sale, should be deducted from the sale price to ascertain the value of excisable goods. Therefore, the Tribunal set aside the impugned order and allowed the appeal, following the precedent set by the Supreme Court.

This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal concerning the interpretation of transaction value, the inclusion of cash discounts in the value calculation, and the applicability of excise duty on the discounted price, providing a detailed insight into the legal reasoning and precedents considered in reaching the decision.