2017 (8) TMI 690 - AT - Central Excise

Valuation - Discount - allowability - the appellant offered quantity discount of 20% to distributors/stockist - Held that - From the contract, it is clear that the so-called 20% quantity discount is not a quantity discount but a commission offered to the stockist. It is not a discount which is given to the buyer but it is given only to the stockist - Further, it is noted that these facts were not brought to the notice of the Tribunal - appeal dismissed - decided against appellant.

Summary

Issues:
Interpretation of quantity discount in institutional supply contracts.

Analysis:
The case involved a dispute regarding the admissibility of a quantity discount offered by M/s. Biochem Pharmaceuticals Inds. Ltd. to distributors/stockists in the context of institutional supply contracts. The appellant contended that the quantity discount should be allowed based on a previous Tribunal decision in their favor. However, the learned AR argued that quantity discount is not applicable in Maximum Retail Price (MRP) based consignments, likening it to a commission to the stockist/distributor. The AR supported this argument by referring to various Tribunal decisions, including Indica Laboratories Pvt. Ltd. and Peejay Rubber Industries Ltd., to establish that such discounts should be included in the assessable value. Additionally, the AR highlighted that quantity discounts are typically offered based on minimum quantity purchases, whereas in this case, a standard 20% discount was provided to the stockist/distributor.

Upon reviewing the submissions, the Tribunal noted that the contract with the Government of Maharashtra did not mention any quantity discount, and the payment terms were clearly defined. An additional letter addressed to a stockist clarified that the 20% discount was offered as consideration for forwarding orders to specific institutions, indicating it was more akin to a commission. The Tribunal observed that this crucial information was not presented during the previous Tribunal order in the appellant's favor. Consequently, the Tribunal found no merit in the appeal and dismissed it, emphasizing that the so-called quantity discount was not intended for the buyer but specifically for the stockist.

In conclusion, the Tribunal's decision focused on the distinction between quantity discounts and commissions in the context of institutional supply contracts. The judgment underscored the importance of clear contractual terms and the need for full disclosure of relevant details during legal proceedings to ensure a fair and accurate assessment of the case.