2002 (9) TMI 700 - AT - Central Excise

Summary

Issues:
1. Whether the special rebate offered by a manufacturer to dealers can be deducted from the assessable value of motor vehicles for central excise duty purposes.
2. Whether the special rebate scheme, involving the deposit of rebate amounts into a Dealer Reserve Fund, qualifies as a permissible discount.

Analysis:

Issue 1:
The manufacturer granted a special rebate to dealers on certain motor vehicle models. The central excise authorities contended that reducing the rebate from the assessable value for duty calculation was impermissible. The Commissioner held that duty was short levied due to this reduction and imposed penalties and interest. The manufacturer argued that the rebate was indeed passed on to dealers, deposited in their security deposit accounts, and treated as income for tax purposes. The Tribunal found that the rebate was genuinely given, and the manner of payment and utilization did not affect its nature as a discount. The manufacturer's commercial right to secure payments from dealers did not alter the fact of the discount granted.

Issue 2:
The crux of the dispute was whether the special rebate scheme, involving depositing rebate amounts into a Dealer Reserve Fund, qualified as a permissible discount. The Commissioner contended that the rebate was not passed on to buyers, making it a mere book entry. However, the Tribunal found that the rebate was genuinely granted, withdrawn by dealers for tax payments, and returned with interest upon termination of the dealership. The Tribunal emphasized that the manufacturer's right to secure payments did not negate the discount nature of the rebate. Relying on legal precedents, the Tribunal concluded that the special rebate was indeed a permissible deduction as a discount, overturning the impugned orders and allowing the appeals.

In conclusion, the Tribunal held that the special rebate offered by the manufacturer to dealers could be deducted from the assessable value of motor vehicles for central excise duty purposes. Additionally, the Tribunal determined that the special rebate scheme, involving the deposit of rebate amounts into a Dealer Reserve Fund, qualified as a permissible discount. The appeals were allowed, and consequential relief was granted to the appellant after setting aside the impugned orders.