Commercial Discount cannot be admitted as Additional Consideration without Evidence: CESTAT Allows Excise Appeal [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai Bench, allowed an appeal and held that commercial discount cannot be admitted as additional consideration without evidence.

The facts of the case are that the appellant, M/s. Mahanagar Gas Ltd., entered into an agreement with Navi Mumbai Municipal Transport (NMMT) for supply of CNG through dispensing units installed at the depot premises of NMMT. Under this arrangement, a discount was extended to NMMT, resulting in a lower sale price as compared to the price charged to other customers for selling CNG through appellant’s other outlets.

The department was of the view that the trade discount was an “additional consideration” and invoking Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, a show notice was issued proposing recovery of differential duty along with interest and penalty. The said demand was confirmed by the adjudicating authority.

When appealed, the Commissioner (Appeals) set aside the penalty but upheld the excise duty demand. Aggrieved, the appellant appealed to CESTAT for determination of whether the trade discount extended by the appellant to NMMT can be treated as an “additional consideration” thereby warranting inclusion in the assessable value.

The tribunal observed that the department rests its case on the assumption that NMMT provided its premises free of cost to the appellant, but is factually incorrect. Further, the tribunal noted that the department has not brought on record any cogent evidence and the basis for invoking Rule 6 collapses as a result.

The bench of Ajay Sharma (Judicial Member) and Rajeev Tandon (Technical Member) highlighted that where lease rent is being paid separately for use of lan and no additional benefit flows from the buyer, the discount cannot be treated as additional consideration. The order upholding the demand of duty was set aside and the appeal was accordingly allowed.

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