2009 (8) TMI 279 - AT - Central Excise

Includibility of discount in assessable value of goods assessee sold goods to M/s. TELCO based on purchase orders in which a discount of 1.9% of the basic price was included by the buyer - There is no dispute that 1.9% collected by the bank from M/s. TELCO, buyer of the goods in question, was not passed on to the manufacturers/sellers. - Tribunal, one such being in the case of India Pistons Ltd. v. CCE, Chennai 2007 (218) E.L.T. 451 holding that the amount in question is in the nature of interest received by the bank from the buyer of the goods and is not includible in the assessable value of the goods sold - The ratio of the above decision is applicable on all fours to the facts of the present case and following the same, we uphold the impugned order and reject the appeal.

Summary

Issues:
Interpretation of discount as commission or trade discount in excisable goods under Central Excise Tariff Act, 1985.

Analysis:
The case involved assessees engaged in manufacturing excisable goods under specific chapter headings. The assessees sold goods to a buyer with a discount included in the purchase orders. The buyers paid the full amount without passing on the discount to the assessees, resulting in the discount being retained as finance charges by the bank. Two show-cause notices were issued proposing recovery of amounts alleging that the discount should be added to the assessable value of the goods. The Addl. Commissioner considered the discount as commission, upheld the demands, and imposed penalties.

Upon hearing both sides, the Tribunal noted that the discount collected by the bank from the buyer was not passed on to the manufacturers/sellers. Referring to a similar case involving M/s. India Pistons, the Tribunal found that the discount was in the nature of interest received by the bank and not includible in the assessable value of the goods sold. Citing the decision in India Pistons Ltd. v. CCE, Chennai, the Tribunal upheld the impugned order, rejecting the appeal. The cross-objection filed was dismissed as it was in the nature of comments/reply to the Revenue's appeal.

This judgment clarifies the distinction between a discount and commission in the context of excisable goods, emphasizing that discounts not passed on to manufacturers/sellers are not to be included in the assessable value of goods. The decision provides consistency in interpreting such scenarios based on established legal precedents, ensuring uniform application of the law in similar cases.