2018 (2) TMI 679 - AT - Central Excise

Valuation - discount of 1.9% given, to get the early payment - includibility - Held that - Clearly since the Appellant had consented to receive payment early from Tata Motors by agreeing to get the Hundi discounted and in terms of such understanding provided discount, it cannot be said that M/s Tata Motors has incurred any expenditure on behalf of Appellant - demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Appeal by Commissioner (Appeals) - Discount provided by Appellant considered as expenditure by buyer - Demand of duty confirmed - Appellant's argument on discount as cash discount - Revenue's contention on expenditure - Adjudicating Authority's findings - Appellant's consent for early payment - Appellant's appeal upheld by Tribunal.

Analysis:
The case involved two appeals filed against an Order-in-Appeal by the Commissioner (Appeals) regarding a discount provided by the Appellant to the buyer. The Appellant, engaged in manufacturing bearings, agreed to provide a 1.9% discount to the buyer, M/s Tata Motors, to facilitate early payment. The revenue authorities treated this discount as expenditure by M/s Tata Motors and demanded duty on it. The Adjudicating Authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the present appeals.

The Consultant for the Appellant argued that the discount was a cash discount given by the Appellant to M/s Tata Motors, not an expenditure incurred by the buyer. The discount was provided to ensure early payment, as M/s Tata Motors was unable to make immediate payment, causing the Appellant to incur interest on borrowed funds. The prices were fixed in the purchase orders, and the discount was clearly shown in the invoices as a cash discount. The Consultant relied on legal precedents, such as CCE, Madurai Vs. Agsar Paints (P) Ltd. and Metal box India Ltd. Vs. CCE, to support the deduction of cash discounts from the assessable value.

On the other hand, the Revenue, represented by the Superintendent (AR), reiterated the findings of the impugned order, arguing that the discount constituted an expenditure by M/s Tata Motors. However, the Tribunal, after careful consideration, found that the discount was part of the transaction between the parties based on purchase orders. The Appellant agreed to provide the discount to facilitate early payment by M/s Tata Motors, and the discount was clearly reflected in the invoices. The Tribunal held that since the Appellant consented to receive early payment by agreeing to the discount arrangement, it could not be considered an expenditure incurred by M/s Tata Motors. Legal precedents, including judgments from the Apex Court and Tribunal, supported this view.

Based on the above analysis, the Tribunal concluded that the demand for duty did not hold, setting aside the impugned order and allowing the appeals with any consequential reliefs. The judgment highlighted the distinction between a cash discount provided by the seller and an expenditure incurred by the buyer, ultimately ruling in favor of the Appellant based on the agreed discount arrangement for early payment.