2001 (9) TMI 472 - AT - Central Excise

Summary

Issues:
Whether trade discount, not passed on to customers, is deductible from the assessable value under Section 4 of the Central Excise Act.

Detailed Analysis:

Issue 1: Trade Discount Deduction
The appeal by M/s. Punjab Worsted Spg. Mills questioned the deduction of trade discount not passed on to customers from the assessable value under the Central Excise Act. The Assistant Commissioner confirmed a duty demand and penalty, citing lack of proof of passing on the trade discount to buyers. The Commissioner (Appeals) upheld the demand for trade discount but allowed deduction for dyeing charges, reducing the penalty. The Appellant contended that a fixed discount rate was known to buyers, relying on legal precedents like Raymond Woollen Mills Ltd. v. CCE. The Respondent argued that as per Section 4(4)(d)(ii) of the Act, trade discounts must be passed on to buyers, supported by the Supreme Court's decision in Union of India v. Bombay Tyres International Pvt. Ltd. The Tribunal examined the provisions of Section 4(4)(d)(ii) and the Bombay Tyres case, emphasizing that trade discounts must be established under agreements or terms of sale, known at or before goods' removal, and non-refundable. The lack of evidence of passing on the discount justified the Revenue's decision not to allow its deduction, preventing unjust enrichment. The Tribunal distinguished between trade discount and cash discount, clarifying that the former must be passed on to buyers to be deductible. The Tribunal upheld the duty demand but set aside the penalty due to the provisional nature of assessments and interpretational issues.

In conclusion, the Tribunal partially allowed the appeal, upholding the duty demand but setting aside the penalty, emphasizing the necessity of passing on trade discounts to buyers for deduction from the assessable value under the Central Excise Act.