2019 (2) TMI 1551 - AT - Central Excise

Valuation - inclusion of element of discount in the assessable value - Provisional assessment or not? - Whether in case of clearance of goods from the depot, the assessment have to be treated as provisional even if the procedure as prescribe by Rules is not followed? - Held that - In the present case assessments were made by the appellants in the scheme of self assessment without following the procedure laid down for making provisional assessments. The fact that clearance were being done from the depot would not make the assessments provisional in absence of the procedure as prescribed under of Central Excise Rules, 2002. Whether the scheme of quantity discount as followed by the appellants is admissible deduction? - Held that - In the present case the goods are cleared by the appellants to their depot after claiming quantity discount as per their scheme of discount the goods are from depot cleared to various distributors across the country. The quantity discount as claimed at the time of clearance of goods from the factory to depot is not passed on to the distributors - In similar circumstances in case of Commander Water Tech Pvt Ltd 2017 (2) TMI 938 - CESTAT MUMBAI , it was held that Quantity discount is an admissible discount provided the same is known prior to clearance or removal and if it is passed on to the buyers in terms of Section 4 of the Central Excise Act, 1944 and the discount have been passed on - quantity discount as claimed by the appellants in the present case for clearance made to the depot is not an admissible deduction. Whether duty free replacements in respect of damaged/ expired goods permissible under the Scheme of Central Excise Act, 1944? - Held that - Issue in respect of Damage Discounts is not resintegra - In case of MRF 1995 (5) TMI 28 - SUPREME COURT OF INDIA three Member Bench of Hon ble Supreme Court has held that The nature and character of the amount so being refunded is certainly not a trade discount contemplated by Section 4(4)(d)(ii), whether the claim is honoured by paying cash or by deducting it from the price of the new tyre - thus, the supply of goods as free replacement in respect of the damaged or expired goods has to be on payment of duty. Whether the demand is barred by limitation in the present case? - Held that - In fact the scheme of clearance of goods by claiming quantity discount in respect of clearances made to depot was nothing but an instrument to claim the inadmissible damage discounts. Such scheme was adopted by the appellants with intention to evade payment of duty in respect of goods supplied as replacement for the damaged/ expired goods. None of the decisions relied upon by the appellants lay down the law that in such case were appellants willfully misdeclared the scheme as that of quantity discount, without passing on the benefit of said quantity discount to distributors, but to benefit itself in respect of free replacements made for damaged/ expired goods - Such colorable devices and instruments used for evasion of Central Excise duty would definitely bring the case within the proviso to Section 11A(1) of Central Excise Act, 1944. Penalty u/s 11AC - Held that - Since it is held that extended period of limitation is applicable in present case, so is Section 11AC. Demand of Interest u/s 11AB of Central Excise Act, 1944 - Held that - Interest is payable as statutory liability in case of short payment of service tax by the due date. Thus Demand for interest under Section 11AB of Central Excise Act, 1944 is also upheld in view of the Apex Court decision in case of Kerala State Electricity Board 2007 (12) TMI 2 - SUPREME COURT OF INDIA . Appeal dismissed.

Issues Involved:
1. Provisional Assessment of Goods Cleared from Depot
2. Admissibility of Quantity Discount Scheme
3. Duty-Free Replacements for Damaged/Expired Goods
4. Limitation on Demand
5. Imposition of Penalty under Section 11AC
6. Interest on Duty under Section 11AB

Detailed Analysis:

1. Provisional Assessment of Goods Cleared from Depot:
The appellants claimed that the assessments were provisional as the goods were cleared from the factory to the depot. However, the adjudicating authority and the Commissioner (Appeals) found no evidence to support this claim. The assessments were not provisional since the procedure prescribed under the Central Excise Rules, 2002, was not followed. The Deputy Commissioner confirmed this through a letter, and the appellants failed to produce any evidence indicating provisional assessment.

2. Admissibility of Quantity Discount Scheme:
The appellants provided quantity discounts on goods cleared to the depot, but these discounts were not passed on to the distributors. The Tribunal referred to the case of Commander Water Tech Pvt Ltd, which held that quantity discounts are admissible only if passed on to the buyers. Since the discounts were not passed on, the Tribunal concluded that the quantity discount claimed by the appellants was not an admissible deduction.

3. Duty-Free Replacements for Damaged/Expired Goods:
The Tribunal cited the Supreme Court's decision in MRF and subsequent cases, which held that goods supplied as free replacements for damaged or expired goods must be on payment of duty. The appellants' scheme of using quantity discounts for replacements was deemed a method to evade duty, thus not permissible under the Central Excise Act, 1944.

4. Limitation on Demand:
The appellants argued that the demand was barred by limitation as the department was aware of the discount schemes. However, the Commissioner (Appeals) found that the appellants did not disclose the actual passing of discounts to buyers and the use of replacement goods. The Tribunal upheld the invocation of the extended period under Section 11A(1), noting that the appellants' actions indicated an intention to evade duty.

5. Imposition of Penalty under Section 11AC:
The Tribunal referred to the Supreme Court's decision in Rajasthan Spinning and Weaving Mills, which established that penalty under Section 11AC is applicable when there is deliberate deception to evade duty. Since the extended period was applicable due to the appellants' willful misstatements and suppression of facts, the penalty under Section 11AC was upheld.

6. Interest on Duty under Section 11AB:
Interest on the short payment of duty is a statutory liability. The Tribunal cited the Supreme Court's decision in Kerala State Electricity Board, which held that interest is payable when duty is not deposited within the prescribed time. Thus, the demand for interest under Section 11AB was also upheld.

Conclusion:
The appeal was dismissed, and the orders of the lower authorities were upheld, confirming the demand of duty, imposition of penalty, and recovery of interest. The Tribunal found that the appellants' practices were intended to evade duty, justifying the extended period for demand and the associated penalties and interest.

← Previous Next →