2009 (4) TMI 391 - AT - Central Excise

Valuation- The appellants are the manufacturers of Biscuits falling under Sub-heading No. 1905.11 of the Schedule to the Central Excise Tariff Act, 1985. In April, 1980, the appellants filed price lists claiming deduction of secondary packing, selling expenses and freight from their sale price, for determination of assessable value. As these deductions were not accepted by the Department, the appellants have started paying duty provisionally from 25-4-1980 on the assessable values claimed by them in terms of Rule 9B of the Central Excise Rules, 1944. Having failed to get the desired deductions on account of post-manufacturing expenses from the Department, the appellants have filed a W.P. No. 9270/81 in the Hon ble Andhra Pradesh High Court, requesting the Hon ble Court to issue an order directing the Department to approve the price lists as filed by them. Held that- the lower authorities have erred in not following the direction of the Tribunal. In view of this we hold that the impugned order is not sustainable and is liable to be set aside and we do so. Appeal is allowed with consequential relief if any.

Issues:
1. Admissibility of quantity discount as a deduction.
2. Interpretation of evidence regarding quantity discount.
3. Compliance with previous adjudicating authority's findings.
4. Correctness of lower authorities' decisions.
5. Appeal against Order-in-Appeal No. 55/99 (H-III)C.E.

Issue 1: Admissibility of quantity discount as a deduction
The appellants, manufacturers of Biscuits, filed price lists claiming deductions for assessable value determination, including quantity discounts. The Department disputed these deductions, leading to a series of litigations. The appellants argued that the discounts were given to dealers and were known at the time of sale. However, the authorities denied the quantity discount, adding it to the assessable value. The Tribunal, in a previous order, directed a reevaluation of evidence on quantity discounts, emphasizing the need for tangible proof of discounts passed on to customers. The Tribunal found that the lower authorities erred in not following its directive and set aside the impugned order, allowing the appeal.

Issue 2: Interpretation of evidence regarding quantity discount
The lower authorities failed to appreciate the evidence provided by the appellants, including a Chartered Accountant's certificate, showing the quantification of discounts. Despite this evidence being available since the initial adjudication, the authorities in the second round of litigation wrongly concluded that the discounts were not known to buyers at the time of clearance. The Tribunal noted the factual error in the lower authorities' interpretation and emphasized that the discounts were indeed passed on, as previously established. The Tribunal held that the lower authorities' observations were misplaced and set aside the impugned order.

Issue 3: Compliance with previous adjudicating authority's findings
The appellants contended that the Deputy Commissioner's denial of abatements contradicted the first adjudicating authority's acceptance of quantified amounts for abatement. The Tribunal noted discrepancies in the Deputy Commissioner's reasoning, deviating from the initial adjudication's findings. The appellants argued that the authorities misinterpreted the nature of discounts, leading to an incorrect denial of abatements. The Tribunal found that the lower authorities failed to adhere to the Tribunal's previous directive, highlighting the need for a reevaluation based on the evidence provided.

Issue 4: Correctness of lower authorities' decisions
The lower authorities, including the Commissioner of Central Excise (Appeals) and the Deputy Commissioner, denied the appellants' claims for quantity discounts, citing lack of evidence regarding the passing of discounts to customers. However, the Tribunal found that the authorities' conclusions were erroneous, as evidence, including a Chartered Accountant's certificate, had been submitted by the appellants since the initial adjudication. The Tribunal held that the lower authorities' decisions were not sustainable and set aside the impugned order, allowing the appeal.

Issue 5: Appeal against Order-in-Appeal No. 55/99 (H-III)C.E.
The Commissioner of Central Excise (Appeals) rejected the appellants' appeal, stating a failure to provide required evidence for determining the eligibility of quantity discounts. The appellants challenged this decision, arguing that the authorities misinterpreted the nature of discounts and failed to consider the evidence submitted. The Tribunal reviewed the case, emphasizing the importance of tangible proof of discounts passed on to customers. The Tribunal found in favor of the appellants, setting aside the impugned order and allowing the appeal with consequential relief.

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