2009 (12) TMI 379 - AT - Central Excise

Valuation- Transit Risk Insurance- Appellant engaged in manufacture of Sheet Glass falling under Chapter 70.02 of the First Schedule to CETA, 1985. Two show cause notices were issued to the appellant covering the period from July, 2006 to June, 2007, proposing to demand the duty on the amount of 7% of the price of the finished goods collected by the appellant in the name of Transit risk insurance/Transit insurance and rejecting the claim of various discounts from the assessable value made by the appellant. Imposed duty, interest, and penalty under Section 11AC of Central Excise Act, 1944. Further, confiscation of the goods has also been ordered and a fine in lieu of confiscation of Rs. 2.5 crores has also been imposed. Held that- The only ground on the basis of which the discount has been disallowed is that the same is not shown in the invoices and is not transparent. Further, as rightly observed by the Board in circular, Central Excise duty is payable on the net transaction value. The Department has not shown that no transaction value is shown in the invoice. Therefore, discount passed on by way of issue of credit note was admissible payment - no evidence produced to show that buyers did not know about it, and department not contending that discount was not passed by way of credit note held to be admissible. - Discount allowed to be deducted from transaction value.

Summary

Issues:
1. Liability for duty on transport charges under breakage charges collected.
2. Rejection of various discounts claimed by the appellant.

Issue 1: Liability for duty on transport charges under breakage charges collected:
The case involved M/s. Gujarat Borosil Ltd., engaged in manufacturing Sheet Glass, facing demands for Central Excise duty on amounts collected for transit risk insurance and rejecting claims of discounts from assessable value. The Tribunal upheld the duty liability on such collections, citing previous orders and observations. The Tribunal emphasized that collections for possible breakage reimbursement were not admissible deductions and that the insurance charges collected were not genuine insurance charges. The appellant argued that buyers had the option regarding transportation charges, presenting invoices and buyer letters as evidence. The Commissioner relied on the Tribunal's order without adequately considering the appellant's claims, leading to a dispute over the optional nature of transit insurance and sale location.

Issue 2: Rejection of various discounts claimed by the appellant:
The Commissioner disallowed discounts claimed by the appellant, stating they were not reflected in the invoices. However, the Commissioner acknowledged that cash, trade, turnover, and additional discounts were permissible deductions under the law. The appellant argued that discounts were passed on to buyers and known in advance, as per circulars and communications with the Central Excise department. The Tribunal emphasized that Central Excise duty is payable on the net transaction value and discounts passed on via credit notes were permissible. The dispute centered on the transparency of discount display in invoices and the requirement for discounts to be known to buyers in advance.

In conclusion, the judgment addressed the liability for duty on transport charges and the rejection of discounts, emphasizing the need for transparency in invoicing and buyer awareness of discounts. The Tribunal's decision was based on previous orders and interpretations of relevant laws, highlighting the importance of evidence and proper application of legal principles in excise duty cases.