2001 (6) TMI 347 - AT - Central Excise

Summary

Issues:
1. Whether the deductions claimed as commissions in the price lists were eligible for duty adjustment.
2. Whether the agreements with agents/distributors constituted valid deductions.
3. Whether the penalty imposed under Rule 9(2) and Rule 173Q(1) was justified.

Analysis:

1. The appellants, manufacturers of inner tubes for tyre, flaps, and curing bags, were charged duty at ad valorem rates. The issue arose when it was discovered that they had entered into agreements for Commission Agency/Distributorship, claiming deductions as commissions in the price lists. The Commissioner invoked Rule 9(2) with proviso to Section 11A, demanding duty and imposing a penalty under Rules 9(2) & 173Q(1). The Commissioner found that the agreements revealed payments only as commissions, not eligible for deduction, and that misstatements occurred in subsequent claims as 'Discounts.' The duty was confirmed, and a penalty was imposed.

2. During the appeal, it was argued that distributors purchased goods and effected sales, with direct supplies made only in a few cases. The issue of the nature of payments remained unresolved, as commissions are generally not deductible for determining value under the Central Excise Act. However, legal precedents emphasized that substance over form should prevail, with courts deciding whether amounts constituted trade discounts. The case of Raymond Woollen Mills Ltd. distinguished the Coromandel Fertilisers case, indicating that commissions not for services rendered could be deductible. The matter was remanded for re-examination to determine the amounts of commission that could be denied for duty adjustment.

3. The appellate tribunal found that a re-examination was necessary to redetermine the cases and commission amounts eligible for deduction. They noted a lack of findings on contravention of Rule 9(1) and preparation of invoices, clearance documents by the appellants. Before considering any penal liability, findings on these aspects were deemed necessary. Consequently, the appeal was allowed, and the matter was remanded for de novo adjudication to address the issues raised thoroughly.