1999 (10) TMI 264 - AT - Central Excise

Summary

Issues:
1. Deductibility of turnover tax and trade discount in determining the assessable value of excisable goods.

Analysis:

The case involved M/s Sujata Textiles Mills, engaged in manufacturing excisable goods like cotton yarn, flax yarn, and man-made yarn. The manufacturer claimed various deductions such as turnover tax, cash discount, trade discount, and other expenses while determining the value of manufactured goods for assessment. The department disallowed certain deductions, leading to a notice to show cause issued to the manufacturer. The adjudicating authority allowed deductions for octroi, transportation, insurance charges, and Textile Committee Cess on actuals but disallowed deductions for turnover tax, selling commission, brokerage, depot expenses, and interest on inventories. The manufacturer appealed against this order, which was dismissed by the Commissioner (A), prompting the manufacturer to approach the Tribunal questioning the correctness of the orders regarding the deduction of turnover tax and trade discount/cash discount.

The main issue revolved around the deductibility of turnover tax and trade discount in determining the assessable value of goods for excise duty purposes. The Tribunal considered the previous decision in Appeal Nos. E/958/98-A and E/1025-1034/98-A, where it was held that turnover tax should be deducted in determining the assessable value. Regarding trade discount, the matter was remitted to the adjudicating authority to determine if the trade discount was known before clearance. The Departmental Representative argued that the appellant must prove actual payment of turnover tax before deduction, citing a Supreme Court decision. However, the Tribunal emphasized that turnover tax should be deducted from the sale price for assessing excise duty, regardless of actual payment, as per Section 4(4)(d)(ii) of the Central Excise Act, 1944.

The Tribunal further clarified that the manufacturer's inability to show turnover tax in the invoice due to statutory prohibition did not justify disallowing the deduction. The deduction should only be disallowed if the manufacturer did not collect the dues over and above the price. Therefore, the Tribunal held that the authorities were incorrect in disallowing the turnover tax that was legally payable. The issue of trade discount was also remitted to the adjudicating authority for a decision on whether the trade practice was known before goods were removed. Consequently, the appeal was partly allowed, granting relief to the appellant on the turnover tax liability.

In conclusion, the judgment highlighted the importance of deducting turnover tax and trade discount in determining the assessable value of excisable goods, emphasizing legal provisions and previous decisions to support the Tribunal's findings.