2017 (6) TMI 801 - AT - Central Excise

Valuation - captive consumption - The assessee were drawing samples for testing quality of the product and were retaining such samples within the factory as control samples - The original authority had confirmed the demand for the reason that drawing of samples should be considered as captive consumption - Held that - the samples are retained within the factory and hence not liable to duty inasmuch as the same have not been cleared from the factory - demand set aside. Quantity discounts - eligibility for deduction - Held that - this scheme is evidently in the form of quantity discounts. Discounts in any form has been allowed as valid deductions under Section 4 of the Central Excise Act, 1944 - in the recent decision of the Tribunal in the case of Biochem Pharmaceutical Industries Vs. CCE, Mumbai-III 2016 (3) TMI 664 - CESTAT MUMBAI , a similar issue was examined and decided in favour of the assessee. It was held in the case that quantity discount was correctly claimed by the appellant as the same was claimed at the time of sale of the goods. Quantum of discount extended - the assessee s claim is that the excise duty paid per unit of bandage is already more than that payable after quantity discount - Held that - the issue has been remanded to the original authority for re-quantification of demand in the light of Rule 5 of Central Excise Valuation Rules 2000. Appeal allowed by way of remand.

Summary

Issues:
1. Whether drawing samples for testing purposes should be considered as captive consumption for duty demand.
2. Whether additional quantities cleared as free offers without payment of duty should be considered as quantity discounts.
3. Whether reduced prices extended to institutional buyers should be allowed as a deduction for excise duty purposes.

Issue 1: Drawing samples for testing purposes

The assessee drew samples for testing purposes and retained them as controlled samples. The original authority considered this as captive consumption, leading to a duty demand. However, the Commissioner (Appeals) set aside this demand, stating that since the samples were retained within the factory and not cleared, they were not liable for duty. This view was supported by previous Tribunal decisions in cases like Electrolux Kelvinator Ltd. vs. CCE, Jaipur-I and Surya Food & Agro Ltd. vs. CCE, Noida. The Tribunal upheld the Commissioner's decision on this issue.

Issue 2: Additional quantities cleared as free offers

The assessee cleared additional quantities as free offers at the time of stock transfer to their depots, claiming these were quantity discounts. The original authority disallowed these discounts, stating they were not intimated to the Department or the buyers in advance. However, the assessee had filed price declarations with the Department as required under Rule 173C of the Central Excise Rules 1944, mentioning the free offers/quantity discounts. The Tribunal found that these discounts were valid deductions under Section 4 of the Central Excise Act, 1944, and were in line with various court decisions. Relying on the decision in Biochem Pharmaceutical Industries vs. CCE, Mumbai-III and the Supreme Court's decision in Purolator India Ltd. vs. Commissioner, the Tribunal concluded that the quantity discounts claimed by the appellant were valid and allowed the appeal.

Issue 3: Reduced prices extended to institutional buyers

A portion of goods cleared at reduced prices to institutional buyers resulted in a duty demand as the reduced price benefit was disallowed. The appellant argued that the excise duty paid per unit was already higher than that payable after quantity discounts. The matter was remanded to the original authority for re-quantification in line with Central Excise Valuation Rules 2000. The Tribunal noted that the decision in the Purolator case needed to be considered during re-quantification. Ultimately, the Revenue appeals were dismissed, and the assessee's appeals were allowed by way of remand.

This judgment addresses various issues related to excise duty demands on samples, quantity discounts, and reduced prices for institutional buyers. The Tribunal upheld the Commissioner's decisions on samples and quantity discounts, citing legal provisions and precedents. The matter of reduced prices for institutional buyers was remanded for re-quantification, considering relevant legal principles.