2024 (3) TMI 341 - AT - Central Excise

Valuation - Exclusion of trade discount that was contracted for supply to stations of Thane Municipal Transport (TMT) from assessable value - to be included as additional consideration or not - HELD THAT - The contractual arrangement includes facilitation of the appellant by their customer and that it is the appellant who has foregone consideration to the extent of trade discount which the lower authorities have convinced themselves to be costs of such facilitation. In thus loading this cost to the assessable value, the original authority has failed to determine the value thereof by reference to Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 which is essential for validity in law. Moreover, the issue was considered by the Tribunal in their own case 2016 (9) TMI 782 - CESTAT MUMBAI on sale effected to oil marketing companies (OMC) and it was held that appellants case is squarely covered under new Section 4(1)(a) of CEA which essentially permit different transaction values, unlike normal sales price existed prior to 1-7-2000, which has also been explained by C.B.E. C., vide its Circular No. 354/81/2000-TRU, dated 30-6-2000 in Para 5. The reliance placed by Learned Authorized Representative on the decision in re re Bharat Petroleum Corporation Ltd 2009 (6) TMI 166 - CESTAT, MUMBAI does not advance the case of Revenue inasmuch as the two transactions therein were held to be akin to barter. Here, it is alleged that money value of the facilities, treated as equivalent to trade discount , be added back to the transaction value. These fall under different provisions of the Rules supra and the lower authorities have not amplified the lack, and remedy, which was sought to be invoked. The impugned order lacks validity and must be set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in this judgment are the inclusion of a trade discount as additional consideration in the assessable value under the Central Excise Act, 1944.

Comprehensive Details:

Issue 1: Trade discount inclusion in assessable value
The appellant, M/s Mahanagar Gas Ltd, challenged the Commissioner of Central Excise (Appeals-II), Mumbai's order upholding the demand of Rs. 4,78,788 and Rs. 88,750 under section 11A of the Central Excise Act, 1944. The dispute arose from a trade discount of Rs. 0.60 per kg of 'compressed natural gas (CNG)' provided to Thane Municipal Transport (TMT). The authorities contended that the trade discount was actually payment for space occupied by dispensers, equipment, and trained staff. The appellant argued that no consideration was received from the buyer for CNG, and the issue was covered by a previous Tribunal decision. The lower authorities based their conclusions on the presumption that the facilities provided by TMT should be considered additional consideration to MGL.

Issue 2: Application of Central Excise Valuation Rules
The Tribunal found that the lower authorities failed to determine the value of the facilities provided by TMT by reference to the Central Excise Valuation Rules, which is essential for validity in law. The Tribunal highlighted that the contractual arrangement included facilitation of the appellant by the customer and that the appellant had foregone consideration equal to the trade discount, which the authorities incorrectly treated as costs of facilitation. The Tribunal emphasized the need to assess the value based on commercial considerations and proper valuation rules.

Separate Judgement by the Judges:
The Tribunal set aside the impugned order, stating that the inclusion of the trade discount as additional consideration lacked validity. The appeals of M/s Mahanagar Gas Ltd were allowed, and the decision was pronounced in the open court on 05/03/2024.