2015 (2) TMI 469 - AT - Central Excise

Valuation - Denial of the deduction of trade discount and turnover discount - Penalty u/s 11AC - ground on which the deductions of these discounts has been disallowed is that the appellant had not intimated to the Department about the discount which they intended to passed on through credit notes, after the sales through depot and they have not resorted provisional assessment - Held that - Grounds on which the deduction of the discounts passed on through credit notes has been disallowed are totally wrong. In terms of the Apex Court s judgment in the case of Union of India and Ors. vs. Bombay Tyre International Ltd. reported in 1983 (10) TMI 51 - SUPREME COURT OF INDIA a trade discount would be admissible for deduction if it is known prior to clearance of the goods and for permitting the deduction of trade discount, it is not material that it must be given at the time of sale and the deduction would be permissible even if the trade discount is quantified after the sale and is given subsequently. It is seen that the Tribunal in the case of Bipico Industries (Tools) Pvt. Ltd. vs. CCE & CUS, Vapi (2009 (6) TMI 772 - CESTAT, AHMEDABAD), CCE, Coimbatore vs. Texmo Industries (2008 (2) TMI 105 - CESTAT, CHENNAI) and Gujarat Borosil Ltd. vs. CCE, Surat II (2009 (12) TMI 379 - CESTAT, AHMEDABAD) has taken same view holding that the discounts passed on by credit notes and not shown in the invoices would be admissible. In view of this, the impugned order confirming the duty demand of ₹ 35,62,555/- alongwith interest and imposing penalty of equivalent amount on the appellant under Section 11AC is not sustainable and is set aside.. The penalty under Section 11AC cannot be imposed when the amount of Cenvat credit wrongly taken or duty short paid on being pointed out was paid forthwith alongwith interest and intimation in this regard was given to the Department and such short payment of duty/wrong availment of credit is not deliberate with intent to evade the duty, for which in this case, there is no evidence. In view of this, we hold that penalty of ₹ 4,42,534/- is also not sustainable. - impugned order is set aside. - However, extension of stay denied - Decided partly in favour of assessee.

Summary

Issues:
1. Disallowance of discounts passed on through credit notes.
2. Wrong availment of Cenvat credit and short payment of duty.
3. Imposition of penalty under Section 11AC.

Analysis:

1. Disallowance of discounts passed on through credit notes:
The appellant, a manufacturer of insecticides, faced a duty demand of Rs. 35,62,555 for the period from March 2002 to October 2002. The dispute arose due to discounts given on goods sold from depots through credit notes. The Commissioner disallowed these discounts, citing lack of intimation to the Department and failure to resort to provisional assessment. However, the Tribunal found this reasoning incorrect. It referred to previous judgments stating that discounts known before clearance, even if quantified after sale and given through credit notes, are admissible. Therefore, the duty demand was set aside, along with the imposed penalty.

2. Wrong availment of Cenvat credit and short payment of duty:
The appellant disputed the penalty imposed under Section 11AC for wrong availment of Cenvat credit (Rs. 4,41,633) and short payment of duty (Rs. 1,891). The Tribunal noted that the amounts were paid promptly upon discovery, without evidence of deliberate evasion. As the Commissioner did not establish deliberate intent to evade duty, the penalty under Section 11AC was deemed unsustainable. The duty and Cenvat credit demands were upheld, but the penalty was set aside.

3. Imposition of penalty under Section 11AC:
Regarding the penalty under Section 11AC, the Tribunal emphasized that penalties cannot be imposed if the duty or credit amount was promptly paid upon discovery, without deliberate intent to evade. As the Commissioner failed to establish deliberate evasion, the penalties of Rs. 4,42,534 were deemed unsustainable. The appeal was disposed of accordingly, with the duty and Cenvat credit demands upheld, but the penalties set aside.

In conclusion, the Tribunal ruled in favor of the appellant regarding the disallowed discounts passed through credit notes and the penalties imposed under Section 11AC, highlighting the importance of prompt payment upon discovery and absence of deliberate intent to evade duty.