2015 (7) TMI 343 - HC - Central Excise

Provisional assessment - applications of the petitioner company have not been responded to by the respondent (revenue) - As a result, the petitioner company is being forced to clear the goods manufactured by it on final assessment basis without taking into account the trade discounts made available by it to its customers, thereby ending up paying excess central excise duty than what is actually payable under the 1944 Act. - Held that - value of the goods cannot be determined at the time of removal of such goods from the factory. This is for the reason that the normal transaction value is not available for such removals at that time as the assessee at that time cannot determine the quantity of discount being extended to the buyers. This can be done only at a later stage, precisely at the end of discount scheme period offered to the dealers which is usually after four months. As per Central Board of Excise and Customs circular dated 30th June, 2000, discount of any type made known prior to the clearance of the goods but quantified subsequently and passed on to the customers is an admissible deduction from the transaction value and as such the assessment for such transactions may be made on a provisional basis. - no legitimate ground exists for the department to disallow the petitioner company to pay excise duty on provisional basis on the concerned goods as per Rule 7 of the Central Excise Rules, 2002 since the actual transaction value cannot be determined at the time of removal of the goods from the factory. Denying such permission to the petitioner company would result in forcing the petitioner company to pay more excise duty than it is actually liable to pay - Decided in favour of assessee.

Issues Involved:
1. Provisional assessment of excise duty.
2. Determination of transaction value for excisable goods.
3. Allowance of trade discounts in excise duty calculation.
4. Binding nature of circulars issued by the Central Board of Excise and Customs.
5. Compliance with the Commissioner's order in the absence of a stay by the appellate authority.
6. Exercise of discretion by the excise authorities.

Issue-wise Detailed Analysis:

1. Provisional Assessment of Excise Duty:
The petitioner sought a mandamus directing the respondents to allow clearance of excisable goods under provisional assessment as per Rule 7 of the Central Excise Rules, 2002. The petitioner argued that due to the nature of trade discounts, it was not possible to determine the correct transaction value at the time of clearance, necessitating provisional assessment.

2. Determination of Transaction Value for Excisable Goods:
Central excise duty is levied based on the value of goods as per Section 4 of the Central Excise Act, 1944. The petitioner contended that the transaction value should be the net price after deducting discounts. Since the discounts are quantifiable only at the end of the notified period, the correct transaction value cannot be determined at the time of removal of goods, justifying provisional assessment.

3. Allowance of Trade Discounts in Excise Duty Calculation:
The petitioner argued that trade discounts, known at the time of removal but quantifiable only later, should be deducted from the transaction value. The petitioner highlighted that discounts are essential for determining the actual price paid or payable, and thus, the excise duty should be calculated on the discounted price.

4. Binding Nature of Circulars Issued by the Central Board of Excise and Customs:
The petitioner relied on a circular dated June 30, 2000, which stated that discounts passed on to the buyer should not form part of the transaction value. The Supreme Court's decision in Union of India vs. Arviva Industries (I) Ltd. was cited, emphasizing that circulars issued under Section 37B of the Central Excise Act, 1944, are binding on the revenue.

5. Compliance with the Commissioner's Order in the Absence of a Stay by the Appellate Authority:
The petitioner argued that the Commissioner's order allowing provisional assessment should be complied with as there was no stay from the appellate authority. The court referred to its earlier decision in Pankaj Guljarilal Gupta vs. Collector of Customs, Calcutta, stating that the department must comply with the Commissioner's order unless stayed by the appellate forum.

6. Exercise of Discretion by the Excise Authorities:
The court noted that the power conferred on public authorities must be exercised reasonably and not arbitrarily. The Deputy Commissioner's refusal to allow provisional assessment on the ground of potential paperwork and litigation was deemed unreasonable. The court emphasized that refusal to exercise such power in appropriate cases amounts to arbitrariness.

Conclusion:
The court concluded that the petitioner's case warranted provisional assessment under Rule 7 of the Central Excise Rules, 2002, due to the nature of trade discounts affecting the transaction value. The Commissioner's order allowing provisional assessment was upheld, and the respondents were directed to allow clearance of goods on a provisional basis. The writ petition was disposed of with an order in favor of the petitioner, ensuring compliance with the Commissioner's order.

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