2019 (8) TMI 869 - AT - Central Excise

Valuation - cash discount which is declared on the invoice even though in some cases the discount was not availed by the buyer and the same was not passed on - HELD THAT - On the identical issue this bench has passed an order in the case of JK PAPER LTD. VERSUS C.C.E S.T., SURAT-II 2019 (2) TMI 1239 - CESTAT AHMEDABAD referring the decision of Hon ble Supreme Court in the case of Purolator India Ltd. 2015 (8) TMI 1014 - SUPREME COURT dealing with the same issue taken a view that transaction value has to be written alongwith expression for delivery at the time or place of deliveries. Therefore, value of excisable goods even on the basis of transaction value is only to be taken i.e. at the time of clearance of goods from assesee s factory or depo. An expression actually paid or payable for the goods when sold means whatever is agreed to as price for the goods on the basis of value whether such price, has been paid in parts or has not been paid at all. Hence, 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 involved: Whether duty is payable on cash discount declared on an invoice even if not availed by the buyer and not passed on.

Analysis:
The issue at hand revolves around the requirement for the appellant to pay duty on cash discounts declared on invoices, even if the buyer does not avail the discount and it is not passed on. The appellant's counsel cited the Hon'ble Supreme Court's decision in Purolators India Ltd-2015 and relied on judgments such as Arvind Mills Ltd-2006, J K Paper Ltd-2019, Gujarat Guardian Ltd-2015, and Gujarat Guardian Ltd-2014 to support their argument. On the other hand, the Revenue's Assistant Commissioner argued that the discount, even if declared in advance, becomes part of the transaction value if not availed by the buyer and hence is not deductible.

The tribunal considered the submissions and records, noting a similar case involving J K Paper Ltd where duty was paid on the cash discount not availed by buyers. The tribunal observed that the cash discount offered by the appellant, which becomes payable if the buyer fails to make payment within the stipulated time, should be considered part of the transaction value as per Section 4 of the Central Excise Act 1994. The definition of "transaction value" includes amounts payable by the buyer in connection with the sale, even if not paid at the time of sale. The tribunal emphasized that the discount amount, though not payable at the time of sale, becomes payable subsequently if the buyer fails to make timely payment.

Referring to the Purolators India Ltd case, the tribunal concluded that the transaction value must be determined at the time of clearance of goods and that any agreed price, including cash discounts, should be deducted to ascertain the excisable goods' value. Following the judicial discipline and the Supreme Court's ruling, the tribunal set aside the impugned order and allowed the appeal, stating that the cash discount should be deductible from the sale price to determine the value of excisable goods accurately.

Therefore, based on the precedent set by the Purolators India Ltd case and the principles of judicial discipline, the tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal.