2003 (11) TMI 127 - AT - Central Excise

Valuation of refrigerators for Central Excise duty on ad valorem basis - eligibility of various discounts - penalty imposition u/s 11A - HELD THAT - From the record, it is clear that discounts under various headings were actually being given and these discounts were declared in the price declaration as well as in the sale documents. Thus they were known at the time of sale. These discounts satisfied the criterion for eligibility to deduction from sale price. The appellant has admitted that certain quantity discounts originally deducted while discharging duty at the time of clearance of the goods, did not get passed on, on account of buyers not meeting purchase targets. These amounts were therefore, not eligible for deduction and duty is payable. Duty so payable is Rs. 60,52,682/-. The lower authorities were correct in demanding this amount as short-levy. Accordingly, the demand to that extent is confirmed. With regard to penalty , it is well settled P B Pharmaceuticals 2003 (2) TMI 68 - SUPREME COURT that no penalty is attracted in the case of recovery of short-levy relating to normal period as stipulated in Section 11A of the Central Excise Act. All the Show Cause Notices in the present case were issued within normal period as provided u/s 11A. Therefore, imposition of penalty was not warranted. Penalty of Rs. 50,000/- imposed is set aside. Thus, the appeal is partially allowed by setting aside the penalty and setting aside duty demand in excess of Rs. 60,52,682/-. Deputy Commissioner shall adjust this amount from Rs. 1.5 crore already paid by the appellant and return the remaining amount to the appellant.

Summary

Issues involved: Valuation of refrigerators for Central Excise duty, eligibility of various discounts, penalty imposition u/s 11A of Central Excise Act.

Valuation of Refrigerators: The Commissioner (Appeals) confirmed a short-levy demand on the appellant for refrigerators cleared during a specific period. The impugned order held that certain discounts like service discount, redistribution discount, special discount, etc., were not admissible as they were considered incentives and not passed on consistently to buyers. The appellant argued that these discounts were eligible deductions as per settled law and provided evidence of discounts being passed on through invoices and price declarations.

Eligibility of Discounts: The Tribunal held that trade discounts, regardless of their nature, are permissible deductions for computing the assessable value of excisable goods. The discounts were considered commercial considerations to gain a sales advantage, and the observation that they were not known at the time of sale was deemed unjustified. Price declarations and invoices showed that discounts were declared and given to buyers, meeting the criteria for deduction from the sale price.

Penalty Imposition: The appellant contended that penalty under Rule 173Q of the Central Excise Act was not warranted as all demands were raised within the normal time limit u/s 11A. The Tribunal agreed, citing precedent, and set aside the penalty of Rs. 50,000. The duty demand exceeding Rs. 60,52,682 was also set aside, with instructions for the Deputy Commissioner to adjust the amount from the appellant's previous payment and return the remaining sum.

This judgment clarifies the eligibility of discounts for valuation of excisable goods, emphasizing that trade discounts are deductible, and penalty imposition is not warranted when demands are raised within the normal period stipulated by law.