2019 (11) TMI 377 - AT - Central Excise

Disallowance of deduction on account of discounts - non-furnishing of necessary evidence to establish that the discounts have been passed on to the buyers - deductions by way of discounts given to buyers disallowed, alleging that the respondents have not furnished necessary documents to show that the discounts have been passed on to the buyers - finalisation of accounts - demand of differential duty - HELD THAT - The original authority has given the details of the documents submitted by the respondents. Each time when the authority has requested for further documents, respondents have responded to the same and furnished all relevant documents. In addition to the verification by original authority, scrutiny by the Assistant Director of Cost also has been done. The Commissioner (Appeals) after going through such documents has reached a conclusion that the discounts are eligible and there is sufficient evidence to establish that the discounts have been passed on to the buyer. The only dispute thereafter which remains is with regard to the quantification of the discounts - For this, the Commissioner (Appeals) has relied upon the Cost Accountant certificate to determine the quantity of the discounts on average/equalisation basis. The Commissioner (Appeals) has correctly held that the discounts were very much known to the parties before the supply. Further, discounts are passed on to the customers and hence are eligible for deduction - Having gone through the voluminous records submitted by the appellants and having come to the conclusion that discounts are admissible, then quantification of the same can be on the basis of equalisation formula - there is no infirmity in the order of the Commissioner (Appeals) - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Disallowance of deductions claimed by the appellant on account of discounts given to buyers.
2. Dispute regarding the sufficiency of evidence to establish that discounts have been passed on to buyers.
3. Quantification of discounts and eligibility criteria for the same.

Analysis:

Issue 1: Disallowance of Deductions
The respondents, manufacturers of tyres under the brand name "CEAT," sought provisional assessment of goods due to unknown prices caused by discounts offered by the principal manufacturer. The original authority disallowed claimed deductions on the grounds of lack of evidence that discounts were passed on to buyers. Commissioner (Appeals) held in favor of the respondents, allowing the deductions. The department appealed against this decision.

Issue 2: Sufficiency of Evidence
The department argued that the Cost Accountant certificate provided by the respondents did not specify the quantum of discounts given by the principal manufacturer. They contended that necessary documents proving the passing on of discounts were not produced. However, the respondents maintained that all required documents were submitted, including invoices, statements, and methodology for discounts. They highlighted that previous assessments were finalized after allowing discounts, questioning the department's change in stance.

Issue 3: Quantification of Discounts
The main dispute revolved around the quantification of discounts. The Commissioner (Appeals) relied on the Cost Accountant certificate to determine discounts on an equalization basis, citing precedent cases to support this approach. The Tribunal found that the discounts were known to parties before supply, passed on to customers, and thus eligible for deduction. The quantification based on an equalization formula was deemed appropriate, with no objection from the department.

In conclusion, the Tribunal dismissed the appeals, upholding the Commissioner (Appeals) decision. The order emphasized the sufficiency of evidence provided by the respondents, the eligibility of discounts, and the validity of quantification based on an equalization formula. The decision highlighted consistency in allowing discounts in previous assessments and rejected the department's challenge to the deductions claimed by the appellant.