2016 (9) TMI 43 - AT - Central Excise

Allowability of discount - removal of goods did not involve sale - assessee failed to produce the documents to arrive at the correct assessable value and had acted as an agent of the principal - Held that - it is found that quantity of P or P medicine cleared from there as quantitative discount was known at the time of clearance of the goods at the factory gate. Also it is pertinent to note that the original adjudicating authority has observed that in respect of the same unit for the earlier period the Assistant Commissioner has held that job worker cannot be held to have acted as an agent/hired labour of the principal manufacturer or with agreement on principal to principal basis. Further for the earlier period the Assistant Commissioner has held that the method of valuation were in accordance with the Circular issued by the CBEC. The learned Assistant Commissioner by following the earlier view dropped the demand in the show-cause notice. On appeal by the department the learned Commissioner(Appeals) without any basis has held that there is no sale involved in this transaction and transaction was not on principal to principal basis and wrongly set aside the order-in-original. Therefore we hold that the appellants have discharged their duty liability on the value arrived at in accordance with the well settled principles of law enunciated by the Hon ble Supreme Court in the case of Ujagar Prints Pvt Ltd Vs UOI 1989 (1) TMI 124 - SUPREME COURT OF INDIA . Since the appellant has already paid the duty on the entire quantity cleared which include free supply quantity and now demanding duty again on quantity discount would tantamount to subjecting the goods to duty twice which is not permitted by law. - Decided in favour of appellant

Issues:
- Disallowance of quantity discount in orders-in-original
- Interpretation of assessable value in relation to job work done
- Application of discounts in transactions without sale involved

Analysis:

Issue 1: Disallowance of quantity discount in orders-in-original
The appeals were filed against a common order-in-appeal by the Commissioner, which set aside the portion of the order of the adjudicating authority allowing quantity discount in orders-in-original dated 24.07.2002 and 11.11.2002. The department contended that the discount claimed by the appellant was not following the established procedure. However, the Assistant Commissioner had earlier dropped the proceedings initiated by a show-cause notice, and the Revenue's appeal was solely against the discounts allowed. The Commissioner held that since there was no sale involved, the discount could not be allowed. The appellant challenged this decision, arguing that the Commissioner's reasoning was contrary to established legal principles. The Tribunal found that the appellants had discharged their duty liability based on well-settled principles of law, as clarified by the Supreme Court in previous judgments. The Tribunal concluded that demanding duty again on quantity discount would amount to double taxation, which is impermissible by law. Therefore, the appeals were allowed by setting aside the impugned order.

Issue 2: Interpretation of assessable value in relation to job work done
The appellant, a manufacturer of medicines, carried out job work on behalf of brand owners/principal manufacturers. The dispute arose when the department issued a show-cause notice demanding duty, alleging that the appellant had declared lower values of goods. The Assistant Commissioner had initially dropped the proceedings, but the Revenue appealed against the discounts allowed. The Commissioner held that since there was no sale involved, the discount could not be permitted. The appellant argued that the Commissioner's decision was not sustainable in law and cited previous judgments to support their position. The Tribunal referred to the Supreme Court's clarification in Ujagar Prints Pvt Ltd case, emphasizing that the assessable value would be based on the value of the gray cloth in the hands of the processor. The Tribunal found that the appellant had already paid duty on the entire quantity cleared, including free supply quantity, and demanding duty again on quantity discount would amount to double taxation. Therefore, the Tribunal allowed the appeals and set aside the impugned order.

Issue 3: Application of discounts in transactions without sale involved
The Commissioner (Appeals) held that since there was no sale involved in the transaction, the discount claimed by the appellant was not permissible. The appellant argued that this decision was contrary to legal precedents and cited relevant judgments to support their position. The Tribunal noted that the original adjudicating authority had previously held that the method of valuation was in accordance with Circulars issued by the CBEC. The Tribunal found that the reasoning given by the Commissioner for disallowing the discount was not in line with the principles established by the Supreme Court. The Tribunal concluded that subjecting the goods to duty twice by demanding duty on quantity discount was not permitted by law. Therefore, the appeals were allowed, and the impugned order was set aside with consequential relief, if any.

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