Trade, Cash, Turnover, and Other Discounts Actually Passed on to Buyers are Permissible Deductions in Excise Valuation: CESTAT [Read Order]
CESTAT held that trade, cash, turnover, and other discounts known to buyers and actually passed on are valid deductions in determining excise valuation.
Trade - Cash - Turnover - Excise Valuation - CESTAT - taxscan
Trade - Cash - Turnover - Excise Valuation - CESTAT - taxscan
The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that trade, cash, turnover, and other discounts known to buyers and actually passed on are permissible deductions while determining excise valuation.
Greenply Industries Ltd. (Kriparampur Unit), the appellant, is engaged in the manufacture of plywood and veneer under the Central Excise Tariff Act, 1985. The company sold its products both from the factory gate and through depots across India.
For goods transferred to depots, the assessable value was determined under Rule 7 of the Central Excise Valuation Rules, 2000, and various discounts such as trade, quantity, cash, turnover, and special discounts were deducted.
The department issued seven show cause notices for the period from September 2009 to March 2010, alleging that the discounts were not supported by evidence and were merely notional. The adjudicating authority confirmed a total demand of Rs. 2.82 crore with interest, and the Commissioner (Appeals) upheld the order. Aggrieved, the appellant approached the Tribunal.
The appellant’s counsel argued that all discounts were genuine and known to buyers before or at the time of removal. They submitted that discounts such as turnover discounts were passed through credit notes and supported by invoices, ledgers, and a Chartered Accountant’s certificate.
The counsel also referred to CBEC Circulars dated June 30, 2000, and July 1, 2002, clarifying that discounts, by whatever name, are allowable if genuinely passed to buyers.
The department’s counsel supported the impugned order, stating that the appellant failed to prove actual passing of discounts and that deductions claimed through credit notes were inadmissible.
The two-member bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) heard both sides and examined the records. The tribunal observed that the appellant had granted various types of discounts as part of its trade policy and that these discounts were known to customers before or at the time of removal.
It explained that valuation under Section 4(1)(b) of the Central Excise Act, read with Rule 7 of the Valuation Rules, allows exclusion of trade discounts actually passed on to buyers. The tribunal pointed out that the invoices on record reflected several discounts and that a Chartered Accountant’s certificate confirmed they were genuinely allowed.
The tribunal found that the disallowance of discounts was contrary to Section 4, departmental circulars, and judicial precedents. It held that all discounts actually passed to buyers, whether shown on invoices or through credit notes, were legitimate deductions.
The tribunal set aside the impugned order, quashed the duty demand and interest, and directed refund of the pre-deposit of Rs. 15,72,748 with applicable interest. The appeals were allowed.
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