2002 (9) TMI 682 - AT - Central Excise

Summary

Issues:
1. Whether the special rebate offered by the manufacturer to dealers can be considered as a permissible deduction as discount for central excise duty purposes.

Analysis:
The case involved a manufacturer of motor vehicles offering a special rebate to dealers on three varieties of vehicles. The Commissioner of Central Excise held that reducing the rebate from the price of the vehicles while fixing the assessable value was impermissible, leading to duty short levied and penalties imposed. The Commissioner's finding was based on the rebate scheme not aligning with normal trade discount practices, as the rebate was deposited into a Dealer Reserve Fund not provided for in the dealership agreement.

The appellant argued that the rebate was indeed given to dealers, deposited in individual dealers' security deposits to ensure dealer protection against default, and remained as a liability in the manufacturer's books. The manner of payment and utilization of the rebate were considered matters for the parties to agree upon. The appellant contended that the rebate being deposited into the reserve fund did not alter the fact that it was a discount.

The appellant further relied on legal principles stating that the rebate, even if deposited in a reserve fund, remained the asset of the dealers and was refunded upon termination of the agreement. The manufacturer's need to secure sales to dealers while providing reasonable discounts was highlighted as a standard commercial arrangement. The appellant emphasized that the rebate was actually given, as evidenced by dealers treating it as income, paying income tax on it, and withdrawing part of the rebate for tax payments.

In contrast, the Respondent argued that the rebate was not passed on to buyers, only recorded as a book entry, thus not meeting the criteria for a discount. The indefinite retention of the amount by the manufacturer was deemed to reduce the rebate to a meaningless book entry, as discounts should be determined and paid at specific times. However, the Tribunal found that the special rebate was indeed granted to dealers, intimated to authorities, and actually paid, leading to the conclusion that the rebate was a permissible deduction as discount for central excise duty purposes.

Therefore, the Tribunal allowed the appeals, setting aside the impugned orders and providing consequential relief to the appellant, as the special rebate was considered a permissible deduction as discount for central excise duty purposes.