2003 (7) TMI 114 - AT - Central Excise

Summary

Issues involved: Central excise duty on free supplies of biscuits, eligibility of discounts for deduction in valuation.

Central excise duty on free supplies of biscuits: The appellants, a manufacturer of biscuits, were charged duty on free supplies of certain varieties of biscuits. The contention was that these free supplies should be treated as discounts eligible for deduction, citing a Tribunal order and a Circular by the Central Board of Excise & Customs. The Tribunal examined the nature of these free supplies and observed that quantity discounts, regardless of how they are provided, are eligible for deduction in determining the assessable value of excisable goods subject to duty based on MRP. The Tribunal referred to previous decisions and the Circular to support this conclusion.

Eligibility of discounts for deduction in valuation: The Tribunal analyzed the concept of trade discounts, emphasizing that quantity discounts, whether in cash or kind, should be considered for deduction in the valuation of excisable goods. It was noted that when a manufacturer supplies additional items along with excisable goods without charging a separate price, the cost of these additional items is factored into the cost structure of the excisable goods. The Tribunal highlighted the importance of wholesaler's margin and the benefit received by the wholesaler in such transactions. The decision emphasized that quantity discounts should be allowed for deduction in valuation, irrespective of the nature of the additional items supplied.

Conclusion: The appeal was successful, and the impugned order demanding duty on free supplies of biscuits was set aside based on the Tribunal's interpretation of quantity discounts and their eligibility for deduction in the valuation of excisable goods.