2025 (3) TMI 564 - AT - Central Excise

Determination of assessable value - discounts which were known to the buyers at the time of clearnace of goods and passed on to the buyers - eligible as deduction for the purpose of determination of the assessable value or not - interest and penalties - HELD THAT - The Appellant cleared the goods provisionally upon payment of excise duty during the relevant period and all the provisional assessments have been made final vide issuing of finalisation orders. The said final assessments have been accepted by the department. It is observed that the assessments finalized for the relevant period were not challenged by the department by way of filing an appeal before Commissioner (Appeals) as provided under Section 35A of the Act. Therefore the final assessment orders had attained finality. In such circumstances it is not open to the revenue to issue SCN to the Appellant for the same period for which assessments have been finalized. Interest and penalty - HELD THAT - The demands confirmed in the impugned order without challenging the final assessment orders is not sustainable and are accordingly set aside. Since the demand of Central excise duty is not sustained the question of demanding interest and imposing penalty does not arise. Conclusion - i) The discounts known and passed on to buyers are deductible for excise duty assessment. ii) The final assessments if not appealed are conclusive and preclude further departmental action for the same period. The impugned order are set aside - appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the discounts allowed by the appellant, which were known to the buyers at the time of clearance of goods and passed on to the buyers, are eligible for deduction for the purpose of determining the assessable value under the Central Excise Act.
Whether the issuance of Show Cause Notices (SCNs) by the department for the same period for which assessments have been finalized is valid, given that the final assessments were not challenged by the department through an appeal.
Whether the demands confirmed in the impugned order are sustainable without challenging the final assessment orders.

ISSUE-WISE DETAILED ANALYSIS

1. Eligibility of Discounts for Deduction:

Relevant legal framework and precedents: The appellant relied on the precedent set by the Tribunal in a similar case, where it was held that discounts known to the buyers at the time of clearance and passed on to them are eligible for deduction when determining the assessable value. This aligns with the principles established under Rule 7 of the Valuation Rules and Section 11B of the Central Excise Act.

Court's interpretation and reasoning: The Tribunal considered the appellant's argument that the discounts were part of their sales policy and were communicated to buyers before the removal of goods. The Tribunal noted that these discounts were reflected in the invoices and were passed on to the buyers, as evidenced by credit notes and CA certificates.

Key evidence and findings: The appellant provided factory and depot invoices, certificates from buyers, and CA certificates to substantiate that discounts were passed on. These documents were crucial in establishing the legitimacy of the discounts for deduction purposes.

Application of law to facts: The Tribunal applied the legal framework to the facts, concluding that since the discounts were known and passed on, they should be deductible from the assessable value.

Treatment of competing arguments: The Tribunal dismissed the department's argument that discounts were not eligible due to the lack of a one-to-one correlation between conditions fulfilled for discounts and their actual passing on.

Conclusions: The Tribunal concluded that the discounts are eligible for deduction, aligning with the precedent and the legal framework.

2. Validity of Show Cause Notices:

Relevant legal framework and precedents: The appellant argued that the issuance of SCNs was premature and invalid as the final assessments were not challenged by the department through an appeal as per Section 35A of the Central Excise Act.

Court's interpretation and reasoning: The Tribunal noted that the final assessments for the relevant period were accepted by the department and were not appealed. Therefore, the issuance of SCNs for the same period was deemed inappropriate.

Key evidence and findings: The final assessment orders, which were not challenged by the department, served as evidence that the assessments had attained finality.

Application of law to facts: The Tribunal applied the legal principles, determining that the department's failure to appeal the final assessments precluded it from issuing SCNs for the same period.

Treatment of competing arguments: The department's position that SCNs were valid was rejected due to the finality of the assessments.

Conclusions: The Tribunal concluded that the SCNs were invalid, given the final assessments were not contested.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "We observe that the assessments finalized for the relevant period were not challenged by the department by way of filing an appeal before Commissioner (Appeals) as provided under Section 35A of the Act. Therefore, we observe that the final assessment orders had attained finality."

Core principles established: The Tribunal established that discounts known and passed on to buyers are deductible for excise duty assessment. It also reinforced the principle that final assessments, if not appealed, are conclusive and preclude further departmental action for the same period.

Final determinations on each issue: The Tribunal set aside the impugned order, ruling that the demands for excise duty, interest, and penalties were unsustainable. The appeal was allowed, with the appellant entitled to consequential relief as per law.

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