2019 (12) TMI 948 - AT - Customs

Valuation - Eligibility for Franchise Discount and Quantity discount on the imports of rock phosphate made by them at karwar port - appellants submit that the discounts are genuine; discounts under any name are to be allowed and that they have not paid over and above the contracted price - extended period of limitation - HELD THAT - In respect of quantity rebate there is a condition that the discount is upon lifting and payment of certain quantity and that JPMC would release this amount to BILT along with the settlement of dispatch/demurrage of last shipment. We find that the dispute is with the Vessel MV Azizia-II; department claims that there are two invoices for the Vessel and they were showing different prices; the appellants contends that out of the 6800 MT, 5000 MT belong to the earlier contract for 45000 MT which was extended to these 5000 MT by virtue of Minutes of a Meeting. The quantity discount was agreed upon by both the parties subject to fulfillment of the condition that the contracted quantity is lifted. If both the parties agree to increase the quantity available for discount even though by way of a Minutes of Meeting, holding such discount is not permissible defies any logic. We see that there is nothing significant in the e-mails transacted to show that such a quantity discount was not extended and was only shown to the Customs authorities with an intent to evade payment of duty. As long as the discount is given, in course of the international trade, and as long as there is no flow back of money from the importer to the supplier, such discounts cannot be held to be not permissible as to hold that It is not understood as to why Revenue thinks that to be eligible the discount should be only under a contract. Assessments, once made provisional, shall be provisional for all purposes; there was nothing to stop the Revenue from going through the contracts and seeking further clarification from the appellants on any of the issues. As the appellants have been continuously importing the same item at the same Port over the years, the charge of suppression of fact cannot be sustained. The appellants have paid duty as per the discharge quantity at the Port of discharge - The submissions of the appellant that sometimes they receive in excess and sometimes they receive short are plausible. Therefore, allegations based on excess receipt in the factory are not maintainable. The discounts availed by the appellants are of commercial nature and no case has been made either on the basis of evidence in the form of higher contemporaneous prices or flow back of money, we find that the discounts have to be allowed - no case is made for demand of duty - Penalty also set aside. Appeal allowed - decide in favor of appellant.

Summary

Issues Involved
1. Eligibility of 'Franchise Discount' on imports of Rock Phosphate.
2. Eligibility of 'Quantity Discount' on imports of Rock Phosphate.
3. Invocation of the extended period for demanding differential duty.
4. Allegations of mis-declaration of value and quantity.
5. Justification for the imposition of penalties and interest.

Detailed Analysis

1. Eligibility of 'Franchise Discount'
The appellants argued that 'Franchise' is a commercial term representing a discount for handling losses and minor variations in draft surveys. The department contended that the term was not commercially recognized, not disclosed in invoices, and applied even when there was no short receipt. The tribunal found that the discount was contractually agreed upon and passed on to the appellants, thus should be allowed. The tribunal referenced the Apex Court's rulings that discounts, irrespective of their names, if passed on, cannot be disallowed. Therefore, the 'Franchise' discount was deemed valid.

2. Eligibility of 'Quantity Discount'
The appellants claimed 'Quantity Discount' retrospectively on the last shipment, arguing it was permissible under the contract. The department disputed this, citing inconsistencies and manipulation in records. The tribunal noted that the contract allowed for such discounts upon lifting and payment of certain quantities. It was found that the discounts were commercially acceptable and there was no evidence of under-invoicing or related-party transactions. Thus, the 'Quantity Discount' was also deemed valid.

3. Invocation of the Extended Period for Demanding Differential Duty
The appellants argued that the demand notice was time-barred, as the assessments were provisional and finalized. The department claimed suppression of facts and non-disclosure of excess quantities. The tribunal found that the provisional assessments should cover all issues and the appellants had been transparent in their dealings. The tribunal concluded that the charge of suppression of facts was unsustainable, and the extended period could not be invoked.

4. Allegations of Mis-declaration of Value and Quantity
The department alleged mis-declaration of value and quantity, citing non-disclosure of excess receipts and manipulated records. The tribunal found that the appellants' explanations regarding the hygroscopic nature of Rock Phosphate and the variations in weight were plausible. The tribunal held that there was no evidence of under-invoicing or mis-declaration with intent to evade duty.

5. Justification for the Imposition of Penalties and Interest
The department imposed penalties on individuals and demanded interest on the alleged differential duty. The tribunal, having found no substantive case for the demand of duty, concluded that the imposition of penalties and interest was also unsustainable. Consequently, the appeals were allowed, and the penalties and interest were set aside.

Conclusion
The tribunal set aside the impugned order, allowing the appeals with consequential relief as per law. The discounts availed by the appellants were deemed commercial and permissible, and the allegations of mis-declaration and suppression of facts were not substantiated. The extended period for demanding differential duty was not applicable, and the imposition of penalties and interest was unjustified.