2000 (1) TMI 82 - AT - Central Excise

Summary

Issues:
- Appeal against order confirming demand of excise duty and penalty for not including value of gift items in assessable value.

Analysis:
1. Issue of Non-Inclusion of Gift Items in Assessable Value:
- The appellants, engaged in manufacturing Ayurvedic medicine, did not include the value of gift items in the assessable value for excise duty payment.
- Show cause notices were issued for demand of duty and penalty under Section 11A of the Central Excises Act.
- Appellants contended that they excluded gift value based on assessment on invoice value, but Assistant Commissioner confirmed the demand and imposed a penalty.
- The dispute revolves around whether the value of gifts can be treated as a trade discount and deducted from the assessable value.
- Precedents like Queens Chemists Mfg. Department v. C.C.E. and Glaxo (I) Ltd. v. C.C.E. establish that gifts given by manufacturers to dealers cannot be considered trade discounts if the dealers do not have a right to a specific gift.

2. Legal Precedents and Arguments:
- The appellants relied on Kothari Detergents (P) Ltd. v. C.C.E., arguing that gifts should be treated as trade discounts.
- However, the Tribunal found this argument misconceived, stating that gifts given as incentives for sales promotion cannot be considered trade discounts.
- The gifts in question, whether in kind or cash, were not manufactured by the appellants and were offered to dealers to promote sales of "Baljeevan Ghutti."
- The Tribunal differentiated this case from Kothari Detergents, where the gifts were manufactured by the company and supplied along with the main product.

3. Decision and Ruling:
- The Tribunal upheld the orders of the Assistant Commissioner and Commissioner (Appeals), stating that the appellants must pay the duty amount and the penalty for wrongfully excluding gift values from the assessable value.
- The penalty was imposed due to the deliberate and illegal deduction of gift values from the assessable value for excise duty payment.
- The appeals were dismissed, concluding that the gifts given by the appellants were not trade discounts but incentives for sales promotion, making them includible in the assessable value of the product.

In summary, the judgment addressed the issue of non-inclusion of gift items in the assessable value for excise duty payment, ruling that gifts given as incentives for sales promotion cannot be considered trade discounts. The appellants' appeals were dismissed, confirming the duty demand and penalty for wrongfully excluding gift values from the assessable value. The decision was based on legal precedents and the distinction between trade discounts and promotional gifts.