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TMI Blog2019 (2) TMI 1551X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Notice, being Central Excise 9CENVAT) duty on clearances of free replacement good without payment of duty during the period 2003-04 2004- 05 and direct it to be recovered from them under proviso to section 11A(1) of the Central Excise Act, 1944. 29(ii) I impose a penalty of ₹ 3,05,724/- under the proviso of section 11AC of the Central Excise Act, 1944. 29(iii) I order recovery of interest on duty of ₹ 3,05,724/- at the appropriate rate under the provision of Section 11AB of the Central Excise Act, 1944. 2.1 Appellant manufacture P P Medicines classifiable under Chapter 30 of the First Schedule to Central Excise Tariff Act, 1944. 2.2 They were allowing quantity discounts which varied from product to product. They were clearing the goods as quantity discount proportionate to the declared scheme along with the excisable goods. All the goods were routed through Bhandup depot to various distributors all over the country. The appellants paid Central Excise duty on the saleable goods and not on the discounted quantity. 2.3 From the depot invoices it was evident that declared scheme of discount was not followed to the extent that i) Proportionat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The system of clearance adopted by them was same since 2001 and department was well aware of the same 4.1 We have heard Shri N S Patel Advocate for the Appellants and Shri Sanjay Hasija, Superintendent Authorized Representative for the Revenue. 4.2 Arguing for the appellants learned counsel supported the averments made in the appeal filed. He submitted- i. relying on the decision of Government of India in Kalapi Stores, Bombay [1981 (8) ELT 807 (GOI)], that they had followed the same practice of clearing goods on quantity discount basis. ii. In case of Bombay Latex Dispersion Pvt Ltd [1985 (19) ELT 527 (T)] it has been held that article given as bonus not separately liable to duty as its price stands included in the price of other articles. iii. He also submitted that extended period cannot be invoked in this case as department was fully aware of the discount scheme and the unit was regularly visited by the departmental officers and unit was also regularly audited. 4.3 Arguing for the revenue learned Authorized Representative submitted that i. The manner in which the appellants have operated the quantity discount scheme is nothing but a scheme of damage disco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of facts so as to invoke extended period under the proviso to Section 11A(1) of CEA 1944, and, b) whether the discount quantity claimed was totally passed on by the appellant to their various distributors as per agreement, if not, then whether the extra quantity left out due to non passing of proportionate discount was used for the replacement of goods received back from the distributors on account of damage/expiry of date/non moving goods? 5.4 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 (348) ELT 464 (T-Mum)], it has been held that- 4. We have gone through the rival submissions. We find that the appellant, as a matter of policy, has given quantity discount to various buyers. Quantity discount is an admissible discount provided the same is known prior to clearance or removal and if it is passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Chief Justice pointed out further that the warranty is not a discount on the tyre already sold, but relate to the goods which are being subsequently sold to the same customers. It cannot be strictly called as discount on the tyre being sold. It is in the nature of a benefit given to the customers by way of compensation for the loss suffered by them in the previous sale . He characterised it as a compensation in the nature of warranty allowance on a defective tyre . We express our respectful concurrence with the said observations. The principle laid down by the Apex Court in the said decision has been subsequently followed in various decisions i.e IPF Vikram India Ltd [2002 (144) ELT 4 (SC)} Hindustan Lever Limited [2001 (130) ELT 721 (SC)], Vikram Detergent Limited [2001 (127) ELT 641 (SC)] and Surya Roshni Limited [2000 (122) ELT 3 (SC)]. Hence we are of the view that supply of goods as free replacement in respect of the damaged or expired goods has to be on payment of duty. 5.6 On issue of limitation Commissioner (Appeals) has observed as follows: 5. On the issue of time limitation, the appellants have taken the stand that the Show Cause Notice has been issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 5.7 Issue in respect of penalty under Section 11AC has been settled by the Apex Court in series of decisions. In case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 03 (SC)], Hon ble Apex Court held as follows: 15. Sub-section 2B of Section 11A provides that in case the person in default makes payment of the escaped amount of duty before the service of notice then the Revenue will not give him the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five per cent of the consequential increase of penalty have also been paid within thirty days of the communication of the order by which such increase in the duty takes effect - Explanation. - For the removal of doubts, it is hereby declared that - (1) the provisions of this section shall also apply to cases in which the order determining the duty under sub-section (2) of section 11A relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President; (1) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.] 17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to subsection 1 of Section 11A and Section 11AC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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