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TMI Blog2019 (12) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the supplier. Revenue contends the eligibility of such discounts and have issued a Show Cause Notice dated 28.05.2008, proposing to disallow the discounts claimed under Section 4(2) of Customs, Act,1962; seeking duty of ₹ 14,76,598 on account of discounts disallowed and allegation of excess quantity imported along with interest and penalties. The same was confirmed by Commissioner of Customs, Mangalore; vide impugned order No. 38/2008 dated 19.12.2008, along with the interest and penalties. Penalties were imposed on Shri Umesh. K. Shenoy and Shri K.D. Naik. A corrigendum dated 29.01.2008 was also issued. 3. Learned Counsel for the appellants submits that JPMC, the supplier, vide its letter dated 10.07.2008, has clearly explained 'Franchise' and 'Quantity Rebate' used in the Contracts; it was also clarified, vide appellant's letter dated 20.03.2007, that 'Franchise' is a commercial term understood by the supplier and the buyer as representing discount given to taking care of small variations in the draft survey between load port and discharge port; this was confirmed in the statement of Shri N.D. Naik on 09.04.2007; Similarly, the Appellants were entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all trade discounts are allowable as permissible deduction and the same cannot be disallowed merely because discount was not deducted from each invoice. An assessee must establish from its accounts that discount relates specifically to sales with reference to which it is allowed and the discount must be in regular trade practice of dealer or contract or agreement entered into in particular case. 3.3. Learned Counsel for the appellants further submits that the value declared by the appellants represents the true and correct value of the goods in question; it is also not in dispute that the Appellants have not paid any amount over and above the invoice price to their supplier either directly or indirectly; it is also not the case of the department that the Appellants and the supplier are related to each other; prices declared in the Bills of Entry, satisfy all the criteria laid down in Section 14 of the Customs Act, 1962 and therefore, to be accepted; department has committed a fundamental error while trying to add the discounts allowed to the 'price paid or payable'; department tried to arrive at the 'actual assessable' in violation of Rule 4 and Rule 9 of the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of its hygroscopic nature; it was agreed between the parties after considering several factors that that the quantity ordered could be plus or minus 10% as per the contract; in some shipments quantity lifted for a particular contract was less and in some cases in excess; at no time, the appellants neither mis-declared the assessable value of the goods, nor had not declared the excess receipt with an intent to evade payment of duty. 3.5. Learned Counsel for the appellants further submits that the demand of duty is barred by limitation; the show cause notice is dated 28.05.2008, demanding differential customs duty in respect of the imports made between 2001 and 2007; though the assessments were provisional, the assessments in respect of 21 Bs./E was finalized on 17.04.2007; Section 28 of the Act is to reckon from 17.04.2007, the demand in respect of these 21 Bs/E a barred by limitation; the findings of the Commissioner on willful misstatement and suppression of facts is without any basis or evidence; Appellants had filed the Bills of Entry and the value as indicated in the invoice and other relevant particulars was also declared in the Bills of Entry; consignments imported wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted a written brief containing the claims of the appellants and rejoinder. He submits that the impugned order was issued after detailed investigation and elaborate discussion on the factual and legal aspects of the various issues uncovered; there was deliberate attempts by the importer in availing undue and abnormal discounts, suppression of information related to the contracts signed, mis-declaration of value, non-declaration of excess quantity received and misinformation to the Customs for requesting for Provisional assessment. 4.1. On the claim of Franchise discounts, Learned AR submits that the franchise claimed as discount by the SCL is an abnormal discount and involves the situation covered under Rule 4(2) (a) and Rule 4(2)(b) of the CVR, 1988. * The commercial invoices did not give particulars of any deduction of "franchise" from the supply price; Franchise is not defined in the contracts of various periods; officials of the SCL gave different, inconsistent meanings for the word franchise; * SCL has explained that it is a discount given to address issues of handling losses at load port and discharge port and to take care of small variations in draft survey de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the CVR; The actual and true transaction value was arrived at by adopting the basic contracted sale price by disallowing abnormal discounts, claimed without any basis in the contract and without satisfying the contractual conditions; department did not propose to add any amount to arrive at the transaction value; thus, the Rule 8 was correctly invoked in arriving at the transaction value. 4.4. Learned AR further submits that the appellants adopted two different pricing for cargo of the same consignment having the same origin, quality and specifications; appellants relied on the price of the expired contract (for which obligations were already completed) for 5000 MT of rock phosphate imported by M.V. Aziza -I (out of the total quantity of 6800 MT); the balance 1800 MT was priced as per the new contracted price; Thus, the price declared for the 5000 MT was improper; the quantity rebate also irregularly claimed for it under the expired contact though the obligation under it was already availed and full quantity discount availed in the last consignment imported in M V AZIZA-I; Purchase order for the AZTZA-TI shipment indicated price of USD 83.37 PMT for the full consignment of 680 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid over and above the contracted price. 6. Learned commissioner finds in respect of 'Franchise' discount that the contract does not define franchise; it is not openly disclosed in the documents or to the department; the adjustments were hidden and disclosed in each invoice; though it is supposed to be a compensation for short received quantity as stated by Shri N.D. Naik, it was availed in respect of imports per MV Pearl Luck an MV Thorsky even though excess quantity was discharged; No such discount was availed before 1999, when there was no duty on import of Rock Phosphate; the term 'Franchise discount' is unheard in commercial parlance, therefore, price paid or payable becomes transaction value as per Apex Courts decision in the case of Ispat Industries 2006 (202) ELT 561 (SC) and reduced price cannot be accepted as per IMFA Ltd 2000(123)ELT 988. The appellants submit that JPMC, the supplier, vide its letter dated 10.07.2008, has clearly explained 'Franchise' and 'Quantity Rebate' used in the Contracts; it was also clarified, vide appellant's letter dated 20.03.2007, that 'Franchise' is a commercial term understood by the supplier and the buyer as representing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count cannot be disallowed. 8. Learned commissioner observes on the issue of 'quantity discount' that the appellants have claimed the discount retrospectively in the last shipment; the appellants did not seek for provisional assessment on this basis, though they sought the same subject to production of documents; the appellants claimed discount, in terms of contract dated 28.4.2004, for 45000MT was already terminated; the appellants on pretext of minutes of meeting 2-3-2006, availed this discount in respect of part consignment of MV Azizia-II; Email dated 20.3.2006 indicates how the discount was manipulated in the records and documents; Shri N.D. Naik exerted pressure on Customs department to accept; Customs Cooperation Council Technical Committee advisory (Note Article 1) defines credit to be an amount already paid. If the price is already paid the same becomes part of transaction value in terms of Section 14 of Customs, Act 1962; JPMC have clarified that import of 45000 MT was completed vide invoice 685/26.1.2006 for imports per MV Azizia-I and that quantity rebate was claimed in each shipment; though there is one bill of lading for 6800 MT they placed two invoices showing value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt as the imports were not under any contract. 10. As we have found above, 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. We find that the Revenue has not levelled any such allegation against the appellants that they and their foreign suppliers are related and that there is any flow back of money. We find that Hon'ble Supreme Court in the case of Eicher Tractors, 2000 (122) ELT 321 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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