2004 (11) TMI 208 - AT - Central Excise

Determination of assessable value - Clandestine removal - Proof - Demand - Cash discount​​​​​​​ - Whether the Appellants have cleared new excisable goods in place of defective goods received back in their factory - HELD THAT - Regarding defective goods, we observe from the statement dated 9-10-2000 of Shri R.K. Gulati that he has clearly deposed therein that the goods so received from various customers under the said D-3, have not actually been rectified and entire new finished products have been sent to the buyer taking it as the goods rectified. This is clear admission on the part of the authorised signatory for Excise matters that new excisable goods were cleared in place of defective goods received back. The certificate given by the Chartered Engineer is dated 5-7-2002 which is much after the period involved in the present matter before us and cannot overcome the clear admission by the authorised signatory of the Appellant-company. Further, if the defective goods were substituted by new goods at one factory, it is reasonable to include that the same practice would be prevalent at the other factory of the same manufacturer. We, therefore, hold that the Appellants were removing the new excisable goods to their customers in lieu of defective goods received back by them. We, however, find force in the contention of the learned Advocate that duty cannot be demanded in respect of the defective goods against which no excisable goods were cleared by the Appellants. This aspect is being remanded to the jurisdictional Adjudicating Authority for reconsideration of the material/evidence that may be produced by the Appellants within two months of receipt of this Order. As per new Section 4, the value has undergone a complete change. The question to be asked for determination of the assessable value under new Section 4 is what is the transaction value of the goods that is the price actually paid or payable for the goods when sold. Contrary to these provisions, under the old Section 4 the value was a deemed one, that is to say, the price at which goods are ordinarily sold in the course of wholesale trade. Now under New Section 4, one has not to look as to what is the price at which goods are ordinarily sold in the course of wholesale trade. The price actually paid or payable is to be taken up as the assessable value. In the present matter, the transaction value has to be taken for the purpose of assessment of duty u/s 4 of the Central Excise Act and as admittedly no cash discount has been given to the customers, the actual price paid by them shall be the assessable value. Accordingly we reject the appeal as far as it relates to the allowance of deduction on account of cash discount. The appeal is disposed of in these terms.

Summary

Issues involved: Determination of assessable value u/s 4 of the Central Excise Act and clearance of new excisable goods in place of defective goods received back.

Assessable value determination: The Appellants contested the Commissioner's decision to disallow deductions for volume discount, cash discount, and sales tax. They argued that the difference between cash price and credit price, representing interest reimbursement, should not be included in the assessable value. They cited relevant case law to support their position.

Demand of duty: The Commissioner confirmed duty demand based on alleged wrongful abatement of volume discount and sales tax deductions. The Appellants argued that the Department's calculation method was flawed and that the actual amounts passed on should be considered for deduction.

Replacement of defective goods: The Department claimed that defective goods were not rectified but replaced with new goods. The Appellants disputed this, stating that all defects were rectifiable and goods were returned to customers after repair. The issue of duty demand on goods not cleared subsequently was raised.

Arguments and findings: The learned D.R. maintained that defective goods were replaced, supported by the statement of the authorized signatory. Regarding volume discount and sales tax, the Department's computation method was deemed correct. The Appellants' arguments on cash discount and duty demand were countered by legal interpretations of the Central Excise Act.

Tribunal's decision: The Tribunal upheld that new excisable goods were cleared in place of defective goods. However, duty cannot be demanded for defective goods not cleared. The matter of deductions for volume discount and sales tax was remanded for reevaluation based on actual amounts passed on. Regarding cash discount, the Tribunal rejected the appeal, emphasizing the transaction value under the new Section 4 of the Central Excise Act. The issue of penalty imposition was left open for the Adjudicating Authority to decide.

Conclusion: The appeal was disposed of with directions for reassessment of deductions and duty liability, while the decision on penalty was deferred to the Adjudicating Authority.