2015 (9) TMI 981 - AT - Central Excise

Denial of refund claim - Determination of assessable value - Inclusion of discounts given - Unjust enrichment - Held that - discount policy of the assessee is known prior to the clearance as the rate of discount is mentioned in the assessee s agreements with their dealers and also from the circulars, it is clear that the deduction of quantity discount cannot be disallowed. - there is nothing in the agreements from which it can be inferred that the quantity discounts being given by the assessee to their dealers are a compensation for the expenses incurred by the dealers for maintaining the showrooms in certain manner and providing certain minimum facilities in the showrooms. A manufacturer can always insist on maintenance of certain minimum facilities in the showrooms by its dealers which would result in more sales and which in turn will benefit both, the assessee as well as the dealer. Discounts have been passed on by the issue of credit notes. Once the credit notes are issued by the assessees to his dealers, the invoice price mentioned in the invoices issued earlier would stand reduced to that extent and in such a situation, the burden of proof would shift to the Department and it would be for the Department to establish that the credit notes issued are bogus. In the present case, there is no such evidence produced by the Department. In view of this, following the judgement of the Hon ble Rajasthan High Court in the case of A.K. Spintex Ltd. (2008 (11) TMI 89 - RAJASTHAN HIGH COURT), and the judgement of the Karnataka High Court in the case of Sudhir Papers (2011 (3) TMI 1443 - KARNATAKA HIGH COURT), we hold that there is no unjust enrichment and that the incidence of higher duty paid by the assessee and whose refund is being claimed has been borne by them and has not been passed on by them to their customers. - Decided against Revenue.

Summary

Issues:
1. Whether quantity/turnover discounts are includible in the assessable value.
2. Whether the refund of duty based on cash discounts is subject to unjust enrichment.

Analysis:

Issue 1: Quantity/Turnover Discounts
The dispute revolves around whether the quantity/turnover discounts provided by the assessee should be included in the assessable value. The Tribunal examined the discount policy and its basis, emphasizing that the discount policy must be known prior to clearance, as per legal precedents. The Tribunal referred to Circular No.354/81/2000-TRU, stating that discounts not forming part of the transaction value should be established as passed on to the buyer. In this case, the discount policy was known before clearance, as rates were mentioned in agreements. The Tribunal ruled that differential discounts to unrelated buyers based on commercial considerations are acceptable, and the deduction of quantity discounts cannot be disallowed.

Issue 2: Unjust Enrichment
Regarding the question of unjust enrichment, it was established that the discounts were passed on through credit notes. Once credit notes are issued, reducing the invoice price, the burden shifts to the Department to prove the credit notes' authenticity. Since no evidence was presented to challenge the credit notes' validity, the Tribunal held that there was no unjust enrichment. Citing judgments from the Rajasthan and Karnataka High Courts, the Tribunal concluded that the excess duty paid by the assessee, for which a refund was claimed, was not passed on to customers.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, affirming that quantity/turnover discounts should not be included in the assessable value and that there was no unjust enrichment in the refund of duty based on cash discounts.