TMI Blog2014 (6) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be made for each removal of Indica cars. It is an admitted fact in the case before us that this has not been done. The price reduction has been effected not on the goods to which it applies but by reducing the price of some other goods (other models of cars) which were cleared at a subsequent point of time. Thus the provisions of section 4 have not been adhered to or complies with on the transactions with which we are concerned with in this appeal. If for some reason, the appellant was not able to determine the value at the time of removal of goods, the appellant could have and should have opted for provisional assessment of the goods under removal as it provided for in Rule 7 of the Central Excise Rules, 2002. Thus the appellant did not choose to comply with the provisions mandated by law but chose to adopt a practice which was not provided for in the law - benefit provided under the law cannot be claimed when the conditions prescribed are not complied with or adhered to. It is a well-settled statutory principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and no other. It can be seen that the Car Targ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrary; it is a compensation for the services rendered by the dealers on behalf of the manufacturer, masqueraded as a discount; it is not passed on to the end customers; and it is not passed on as a price reduction of the goods to which it pertains to. Thus the so called special discount claimed to have been passed on by the appellant to the dealers is not a trade discount at all so as to be eligible for exclusion from the assessable value of the goods removed as per the provisions of section 4 of the Central Excise Act. Therefore, denial of abatement of the said discount from the assessable value of the goods sold is clearly sustainable in law and accordingly, we uphold the demand for differential duty confirmed in the impugned order, Arguments to the contrary made by the appellant in this regard merits total rejection - Decided against assessee. - Appeal Nos. E/1362 to 1365/2012 - Final Order Nos. A/200-203/2014-WZB/C-II(EB) - Dated:- 25-3-2014 - P R Chandrasekharan and Anil Choudhary, JJ. For the Appellant : Shri V Sridharan, Sr Adv. For the Respondent : Shri K M Mondal, Special Consultant JUDGEMENT Per: P R Chandrasekharan: 1. The appeals are dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el of Tata car and the dealer's sale person got paid a certain amount which was borne by TML. IT is these expenses which were borne by the dealers while reselling the cars purchased from TIL to the ultimate consumers, which are being compensated by TML. This compensation was done by way of reduction of the value of some of the Indigo cars sold in the subsequent months by an amount of Rs. 1,00,000/- per car. 2.5 During the investigation, statements of most of the senior officials of TML were recorded to ascertain the factual position. Shri Suhas Kulkarni, Asstt. General Manager (Finance), in his statement recorded on 03/08/2009, on being asked as to how discounts reflected in the invoices of TML to its dealers were worked out, stated that quantification of discount was done by their Sales-Finance office at Thane in consultation with their Marketing office at Mumbai. He also submitted copies of discount circulars addressed to all the Car dealers in respect of the passenger cars for May, June and July, 2008 one of which read as follows: DISCOUNT CIRCULAR NS/858 Date: 7 th May, 2008 To, Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a (iv) Shri Gautamchand Jain, Managing Director of Autofin Limited. (v) Shri Shree Kumar P., Dy General Manager of M/s. R.F. Motors Pvt.ltd., Kochi (vi) Shri Suman Kapur, General Manager of M/s. Society Motors Ltd. (vii) Shri S. Shanmugasundaram. General Manager (Finance) of M/s. VST Motors Ltd., Chennai (viii) Shri P. Chandra Sekhar, Sr. Manager, Finance Corporate Affairs of M/s. Prerana Motors (P) Ltd., Bangalore. All of them had, inter alia, stated that the car target schemes submitted by them were the only discount and sale policies circulated by TML. 2.9 Statements of some of the Regional Managers of TML were also recorded in this regard. (a) In his statement dtd. 05/11/2009, Shri Deepankar Tiwari, Regional Manager of TML, Mumbai, had, inter alia, stated that apart from Car/UV target schemes, no other document was issued to the dealers on monthly basis. (b) In his statement, Shri. K. Vijay Menon, Regional Manager-South-2, Passenger Car Business Unit, Chennai had, inter alia, stated that he had not seen the so-called circulars/incentive structure as submitted by Shri S. Krishnan under his statement dtd. 26/08/2009. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nior officials of TML in their respective statements recorded during the investigation. 2.11 What finally emerged from the investigation is as follows: i) During the period from April, 2006 to July 2008, the incentive amounts attributable to Indica Indigo Cars and payable to the dealers based on their performance as per the monthly Car Target Schemes were paid to the dealer by reducing the value of only Indigo Cars (except Indigo CS) under the guise of special discount @ Rs. 30,000/- or Rs. 45,000/- or Rs. 1,00,000/- (at different points of time) sold from the factory of TML to the dealer in the succeeding month(s). (ii) When sufficient number of Indigo Cars were not lifted by the dealer(s), then TML reduced the transaction value of Utility Vehicles so as to pass on the incentives attributable to Indica Indigo Cars for the past period. iii) The transaction values of Indigo Cars Utility Vehicles were reduced for paying the incentive amounts to dealers in the guise of 'special discounts' as these vehicles attracted higher rate of Central Excise duty than Indica Cars. 2.12 During the investigation, TML took the stand that the discounts were pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priated the interest amount of Rs. 5,97,29,128/- against the interest payable. The Commissioner also imposed penalties on the following persons under Rule 26 of the Central Excise Rules, 2002: (i) Shri. S. Krishnan - Rs. 25 lakhs (ii) Shri Rajesh Bagga - Rs. 15 lakhs (iii) Shri Nitin Seth - Rs. 5 Lakhs Aggrieved of the same, the appellants are before us. 3. The Ld. Counsel for the appellants submits the following: 3.1 The retail scheme discount is the discount given to the dealer which would be ultimately be passed on to the retail consumer and is not connected to any of the targets i.e., offtake target or retail target. The customers would not be concerned with dealers achieving the targets and hence such discounts have to be passed on to the customers irrespective of the dealer achieving/not achieving the off-take and retail targets. An affidavit of Mr. S. Krishnan has been filed in this regard. 3.2 The dealers have passed on the retail scheme benefits to the ultimate consumers and on back to back basis, the appellant has given discounts to the dealers. Therefore, there is effective reduction in the price of the vehicles sold to the dealer. 3.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dealer would in turn pass on to the consumer in the form of certain services such as free insurance, extended warranty etc. Hence, the present case is squarely covered by the above decision of the Tribunal. 3.7 In the case of GOI vs. Madras Rubber Factory - 1999 (77) ELT 433 (SC) which is relied upon by the Revenue, the assesee had manufactured tyres and sold the same with the warranty that the tyres would run for certain distance and if tyres do not run for such distance, the customer would be eligible for discount in the next sale of tyre to the said customer. Thus, there was a contract of sale of tyre between the assessee and the customer with the condition that the tyre would run certain distance. On breach of the contract, the customer was eligible to get compensation. The said compensation for breach of contract given to the customer as discount in the next sale was held to be not eligible as discount by the Hon'ble Supreme Court. In the present case, there is contract for sale of vehicle between the appellant and the dealer. The contract was honored and therefore the incentive was given to the dealer as discount. There is no breach of any contract and therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at trade discount based on the quantity lifted by the dealer is eligible for deduction. Again in the case of Fag Precision Bearing Vs. CCE - 2000 (118) ELT 711 (T) the Hon'ble Tribunal had held that the turnover bonus is deductible from the assessable value. In the case of Reliance Industries Limited Vs. CCE - 2001 (133) ELT 773 (T) the Tribunal had held that the quantity discount given is an eligible deduction. Similarly, in the case of Bhor Industries Vs. CCE in order NO. A/178-179/WZB/2005/C-I dated 5.1.2005 the hon'ble Tribunal had held that the trade discount which was known prior to the removal was eligible for deduction. Reliance is placed on the decisions of the Hon'ble Bombay High Court in the case of Goodlass Nerolac Vs. UOI - 1993 (65) ELT 186 (Bom) affirmed by the Hon'ble Supreme Court - 1994 (73) ELT A58 (SC). 3.12 The appellants have computed the discount based on the qualifying criteria mentioned in the scheme. The appellants computed total amount of discount entitled to each dealer and passed on the same to the dealers. It is in the nature of averaging of discount which is permissible in law. In Nalco Chemicals Ltd. vs. CCE - 1998 (104) ELT 730 (t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods would be the transaction value if, the goods are sold by the assessee, for delivery at the time and place of the removal, the assese and the buyer of the goods are not related and the price is the sole consideration for the sale. In the present case, undisputedly, the assessable value is transaction value as all the aforesaid conditions are satisfied. 3.17 The appellants have paid excise duty on the total amount received from the dealers. The appellants have received the amount from the dealers which is shown in the excise invoice. There is no dispute on the fact that the appellants have paid the excise duty on the entire amount received from the dealers and the appellants have not received any amount over and above the amount mentioned in the invoices. Therefore, any further demand of duty is contrary to the definition of transaction value and Section 4. 3.18 The aforesaid submissions is fully supported by the recent Larger Bench decision of CESTAT in the case of CCE Vs. Victory Electricals- Order dated 18.11.2013. 3.19 Excise department is concerned with the price of the goods sold. How the price is determined is not the concern of the excise department. The appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moval. The appellants submit that they have correctly determined the value of each removal. The value of each goods is the value mentioned in the excise invoice which has been paid by the dealer. 3.22 CBEC Circular dated 30.6.2000 clarifies that discount is eligible for deduction when it is established that the discount for a given transaction has actually been passed on to the buyer of the goods. The differential discounts extended as per commercial considerations on different transactions to unrelated buyers if extended, cannot be objected to and different actual prices paid or payable for various transactions are to be accepted for working assessable value. 3.23 The appellants submit that the department has incorrectly presumed that the discount given in the sale of vehicles is not the discount for that very vehicle. Merely because discount has been computed on the basis of sale of turnover of other vehicles cannot be a ground to presume that the discount is not pertaining to the vehicle in which the discount has been given. The car target and incentive scheme does not provide that the discount computed based on the scheme is discount for the vehicles sold in that month on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of discount given in the invoices. The appellants submit that a specific amount incurred towards advertisement by the dealer is reimbursed to the dealer. The amount so reimbursed is adjusted in the discounts given in the invoices. In other words, the amount of discount has been reduced to the extent of amount of advertisement given to the dealer and therefore, the appellants have given less amount of discount as the amount of discount has been reduced due to advertisement reimbursement to the dealer. Therefore, the appellants have claimed less deduction on account of discount. This cannot lead to conclusion that the discount is settlement of past dues. In view of the above, the appellants had erred in favour of the revenue by adjusting the amount relating to advertisement, extended warranty and free insurance. This is not a settlement of dues. Hence, the impugned Order holding that the discount is past settlement is incorrect. 3.26 The appellants issued incentive scheme to the dealers. The scheme provides eligibility criteria and the amount of incentive for which dealer would be eligible. The amount of discount to be passed on to the dealer is not mentioned in the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of discount on Palio car cannot be a ground to hold that the discount of Palio car has been given as a special discount. The incentive scheme refers to discount on Palio car for the only reason that all the discount offers should be at one place. In any case, this ground of the department is beyond the scope of Show Cause Notice as there is no such allegation in the Show Cause Notice and no opportunity was given to the appellants to explain this issue of discount on Palio car. Hence, the impugned Order is liable to be set aside. 3.29 The Commissioner in the impugned Order has denied the deduction of discount on the ground that the said discount is pertaining to the sales made earlier and not pertaining to the sale of goods in which the discount has been given. In other words, the discount is eligible for deduction in the earlier sale. Since no deduction in the earlier sale has been claimed, the appellants have paid higher excise duty in the earlier sale. Having paid the higher excise duty, there cannot be any intention to evade payment of duty. The Commissioner in the impugned Order has held that if the appellants would have followed the provisional assessment procedure, the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellants is baseless. 3.32 The department had raised an objection that the appellants have passed on the discount which is pertaining to Indica car in the sale of Indigo car. Indica car is chargeable to less rate of excise duty compared to Indigo brand car with effect from 1.3.2006. Due to cross model utilization of discount, there is a short payment of duty on the Indigo brand vehicles. Without prejudice to any other submissions, the appellants had already paid this differential duty amount along with interest and 25% penalty. Hence, any adverse inference drawn based on this ground of cross model utilization is incorrect and not called for. 3.33 The appellants submit that they are following this method of cross model utilization from many years. The department never objected to this method. The change in the rate of duty has resulted in alleged short payment of duty. The appellants submit that they have not changed the method passing on of discount because of change in the rate of duty with effect from 1.3.2006. The appellants were following this method of cross model utilization prior to 1.3.2006 also. The appellants have also produce evidences to support this cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispute, Mr. Menon was not a Regional Manager. He became Regional Manager only in 2009. Further the question which was asked to him was whether the incentive structure letter was received by him in the capacity of Brand Manager. The said Circular was admittedly not addressed to Brand managers and therefore, he did not receive the said Circulars. Further, Mr. Menon had given a clarification letter to the Commissioner and requested to read his statement along with the clarification letter. The above submission has not at all been considered by the Commissioner in the impugned Order-in-Original. Hence, the impugned Order is liable to be set aside. 3.35 The department further relied upon the statement of Mrs. Sunvanti Ursekar, Assistant Manager, sales and finance department to allege that the incentive structure circular is fabricated document. The appellants submit that Mrs. Ursekar was not the Regional Manager and therefore the said incentive structure circular was not addressed to her. However, the content of the said circular was received by her in the email and accordingly number of vehicles eligible for discount was computed. Further, Mrs. Ursekar has given a clarification lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said case of the department regarding submission of fabricated and false documents. The appellants further submit that the aforesaid Circular was submitted to the department in the course of investigation and the same was part of the reply to the Show Cause Notice also. The Commissioner has simply ignored this Circular. Hence, the impugned Order-in-Original is liable to set aside on this count alone. .39 The appellants submit that the demand itself is not maintainable and therefore penalty and interest is not imposable. In any case, the appellants submit that there is no suppression of fact and much less with intent to evade payment of duty and therefore no penalty can be imposed on the appellants. Further, the issue involved in the present case is purely a interpretation of definition of transaction value and therefore penalty cannot be imposed on the appellants. 3.40 Penalty imposed on the co-appellant under rule 26 is incorrect as there is no proposal for confiscation of goods and therefore, Rule 26 is not invokable. Rule 26 can only be invoked in cases where the assessee has dealt with the goods which are liable to confiscation. In the instant case, the department itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Books of Accounts of the dealers. It may also be mentioned here that Car Targets and schemes do not specify or spell out in what form or manner the incentive amounts (TML's contribution) are to be given to the dealers. Incidentally, it was also submitted that each of the dealers have a running account maintained with TML. Therefore, as a matter of accounting, in the normal course, the incentive amounts should have been credited to the dealer's running account maintained with TML. However, TML chose to pass on the incentive amount to the dealer(s) in the guise of 'special discount' by reducing the transaction value of only the Indigo Cars purchased by the dealers during the subsequent months. At this stage, it is also important to note that TML undertakes the job of advertisements on behalf of the dealers and on account of this, TML charges Rs. 500/- per Car and Rs. 1,500/- per Utility Vehicle. These sums are deducted from the incentive amounts and then the balance is passed on to the dealer(s) as 'special discount'. Be that as it may, the incentive amounts earned by the dealers by achieving both retail Off-take Targets cannot be termed as 'spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;special discount' is in the nature of a benefit given to the dealers by way of compensation for the loss suffered by them in the previous sale, as held by the Hon'ble Apex Court in the case of Asstt. Commissioner of C.Ex. Ors. V/s. Madras Rubber Factory Ltd. Ors. - 1987 (27) ELT 553 (S.C). 4.5 It is also submitted herein before that the so-called 'special discount' is not relatable to any particular transaction. Therefore, this so-called 'special discount' cannot be permitted to be deducted from the transaction value of Indigo Cars Utility Vehicles. This submission is supported by the Apex Court's judgment in the case of Commissioner of Customs V/s. Bureau Veritas - 2005 (181) ELT 3 (S.C.). Though the judgment is in the context of Customs Valuation, it is equally applicable to the Central Excise Valuation for the reason that transaction value under the Central Excise Act is similar to that of Customs Valuation. 4.6 A look at the Car Target Schemes would reveal that the majority of the schemes were offered to the end customer by the dealer i.e. the retail discount, free extended warranty, free insurance, soft loan financing etc. were all o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment. Perusing these two letters, it is seen that these letters talk about 'assessable value of Indica cars'. In that connection, these two letters mention about the manufacturer's Bonus Scheme for the year 2000-01 and 2001-02 which will be offered to the Dealer in the form, of discount of Rs. 20,000/- per Car. It is needless to say that Bonus is not same as discount. In the present case, the basic allegation is that the appellant had reduced the transaction value of Indigo Cars and Utility Vehicles carrying higher rate of duty in the guise of special discount. During the investigation, Shri S. Krishnan, Senior Vice President-Commercial had stated in his statement dtd. 18/3/2010 that it was he who formulated the policy Scheme in2006 of reduction of transaction value of Indigo Cars utility Vehicles for adjustment of incentives attributable to Indica Cars. Therefore, the two letters referred to by the learned Senior Counsel for the appellant have no bearing on the present case where duty has been evaded deliberately by reducing the transaction value of Indigo Cars Utility Vehicles at the rate of Rs. 30,000/- Rs. 45.000/-, Rs. 1,00,000/- at different points of tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt does not dispute duty demand to the extent of Rs. 13,65,04,371/- being the duty on discounts on the Indica cars sold by the appellant but passed on to the dealers by reducing the price of Indigo cars which attracted a higher rate of duty than that on Indica car. In his letter to the investigating agencies vide PYG-416 dated 20-4-2011, the Sr. Vice President (Corp. Finance) had submitted that the company had adopted the method of passing of discounts through sale of Indigo/UVs on a purely commercial consideration without any intent to evade payment of duty. According to us, it would not be out of place to state that had the company passed on the discounts as applicable to the respective vehicles, this controversy would not have arisen at all. It is further on record that they had also paid interest on the said duty amount apart from 25% thereof being the penalty payable on the said amount of duty short paid. In the said letter, it is further mentioned that this has been done to put an end to co-ercive investigation and the factum of payment should not construed as an admission of any offence in any manner of whatsoever. In view of the above factual position and considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory; from where such goods are removed; (cc) time of removal , in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory; (d) transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere under this Act, any article is chargeable with duty at a rate dependant on the value of the articles, such value shall be deemed to be- (a) the wholesale cash price for which an article for the like kind and quality is sold or is capable of being sold It will be seen that what constitutes the value is the wholesale cash price . It is not any price but the price . The use of the definite article the would by common usage, indicate that the reference is to a single price and not ot a multiplicity of prices, such as would have been implied if the wording had been any wholesale cash price . Again, in the alternative clause(b) the reference is to the price (emphasis supplied). 41. Secondly, and more important, acceptance of a multiplicity of assessable values under the same conditions would cut at the very basis of the Self Removal Procedure, which is set out in Chapter VIIA of the rules made under the Act. The core of the Self Removal Procedure is that an assessee can assess his goods himself, pay duty and remove them, on the basis of the value and rate of duty approved by the proper officer. Rule 173C provides for the filing of a price list and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a permissible trade discount or not. According to the appellant, as a measure of sales promotion and marketing policy, they issue Car Targets and Schemes to its dealers on a monthly basis. One such Car Targets and Schemes for August, 2007 issued to M/s Auto Point, Surat is taken up for consideration. Perusal of this Car Targets and schemes for August, 2007 shows that it has been issued to Mr. Inderjit Singh Ghura of M/s. Auto Point., Surat and it is dealer-specific. It contains retail targets and off-take targets to be achieved by the dealer during the month. Retail target means the number of vehicles to be sold by the dealer to its customers, while the off-take target means the number of vehicles to be purchased by the dealer from M/s. TML. The scheme also shows various incentives to be offered to the retail customers. The incentive includes, inter-alia, cash discounts, soft loan with low interest rate, free gift, extended warranty, etc. It will be worthwhile to note that the benefits to the retail customer will accrue only if the dealer achieves both the off-take and retail targets set for him. Otherwise, no benefit will accrue to the retail customer, In other words, the benefits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orthwhile to note that such special discounts are not uniformly given in respect of all vehicles or to all the customers. The special discount is dealer specific and is conditional on achieving the off take target and the retail target fixed for the dealer. The scheme does not reveal the basis for fixing the off-take and retail targets and whether the basis was uniform or not. 5.8 It can be seen that the Car Target Schemes do not specify or spell out in what form and in what manner the incentive amounts will be given to the dealers. It is on record that each dealer has a running account maintained with M/s. TML. Therefore, as a matter of accounting, in the normal course, the incentive amounts should have been credited to the dealer's running account maintained with M/s. TML. However, instead of doing so, M/s. TML chose to pass on the incentive amounts to the dealers in the guise of 'Special Discount' by reducing the transaction value of only the Indigo Cars purchased by the dealers during the subsequent months. These incentive amounts earned by the dealers by achieving the targets fixed by M/s. TML cannot be termed as a 'Special Discount' for the following re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate from the so called discount circulars submitted by Shri Kulkarni, AGM of Tata Motors Ltd. along with his statement dtd. 12/08/2009 and claimed to have been circulated to the dealers; (4) The working of car target scheme, in brief, is that the said scheme gives targets (both offtake and retail) to the dealer and there are retail schemes under which discounts and other incentives can be offered by the dealer to the retail customers. (5) These discounts/incentives are partly borne by the dealer and partly by M/s. TML and TML's contribution is given to the dealer by reducing the values of cars sold in the subsequent month from TML's factory to the dealer by showing it as discount (6) All the incentives available to the dealers were adjusted in Indigo cars only and the discount of Rs.1,00,000/- as reflected in the invoices of Indigo cars was on account of accumulation of incentives/TML contribution accrued for Indica and Indigo models of cars sold by the dealers during the previous month. (7) No other communication in any form other than the car target scheme was received by the dealers from TML. (8) On achieving the target for a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il customer along with incentives to the dealer if he achieves the performance and based on these circulars the monthly car target schemes are prepared and sent to the dealers. These circulars are completely different from the incentives structure submitted by Shri Krishnan in his statement dtd. 26/08/2009. 5.10.2 Shri K. Vijay Menon, Regional Manager, South-2, Passenger Car Business Unit in his statement dtd. 04/12/2009 has reiterated the same facts as stated by Shri Deepankar Tiwari. He had stated that the circulars issued by the Sales Headquarters consist of targets for the off take and retail for the whole region and the second part of the circular contains the proposed incentives on achieving the targets - retail and off-take - for the respective cars. These incentive schemes were issued at the beginning of the month and also show the retail discount to be given by the dealer to the retail customer in the said month and the compensation promised by M/s. TML. He further stated that some of the retail schemes offered were in the form of free extended warranty, loyalty and free insurance to be given by the dealers to retail customers, a part of which is to be borne by M/s. TML ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customers. Ans: Yes Q. No.11 Please state as to how the dealers are making payments to M/s. TML for purchase of Cars? Ans: Every dealer has got a running credit account with M/s. TML, wherein he has got to maintain sufficient balance so as to cover its latest purchase Q.No.12 If M/s. TML has got to make any payments to the dealers, how are they making such payments? Ans: Such payments are made by M/s. TML into the running credit accounts of the dealers. Q.No.13 What is the general practice in automobile industry for account settlement between the manufacture the dealers? Ans: I do not want to comment. Q.No.14 What was the reason behind the move to pay to the dealer the amount due to them by way of reducing the value of subsequent sale? Ans: It is a marketing policy decided by Marketing Department and for details, you may ask the Marketing Department. Que No.15 At what level this policy was authorized at M/s. TML? Ans: This policy was authorized by the President (Marketing), M/s. TML. Q.No. 16 Whether the policy of paying to the dealers the amount/incentives due to them, by way of reducing the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o you accept the same? Ans: Yes Q. No. 2 Do you accept that the reduction of Rs.30,000/45,000/1,00,000 in the transaction value of Indigo Cars (except Indigo 'CS') in the invoice covering its sale from the factory of M/s. TML to the dealer, was on account of incentives amount payable by M/s. TML to the dealer for earlier purchases in the earlier month of Indica and Indigo cars by the said dealer? Ans: Yes. Q.No. 3 Please state as to how the dealers are making payments to M/s. TML for purchase of cars? Ans: Every dealer has sufficient balance to cover his purchase of cars and in case of any short fall in the running account, he makes payment by cheques or through his financier. Q. No. 4 Does the dealer maintain a separate running credit account for Indica, Indigo and UV cars? Ans: He maintains separate running account for cars (Indica, Indigo) and UV. Q. No. 5 If M/s. TML has to make any payment to the dealer, how are they making such payments? Ans: Payments are made by crediting to the running dealer account. Q. No. 6 Why the incentives earned on Indica vehicles was paid by way of reducing the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s arrived at to reduce the value of Indigo cars? Ans: These were arbitrary figures to pass on the total incentives Q.No. 19 Please state as to whether during the period Apr, 06 to July, 08 some parts of incentives attributable on Indica/Indigo cars as per the offtake/retail target achieved by the dealer, based on the car target schemes issued by M/s. TML, was paid to the dealer by way of reducing value of UV (Sumo, Safari) @ Rs. 1,00,000 sold in the succeeding month from the factory of M/s. TML to the dealers? Ans: Yes, we have paid the incentive of Indigo/Indica in MUV (Sumo, Safari) for the months of Mar, 08 to May, 08. Q. No. 20 What is the reason behind this payment of incentives attributable to Indica/Indigo on the sale of UV's during Mar, 08 to May, 08? Ans: It is quite possible that adequate Indigo's were not available during those months to cover the incentives. Q. No. 21 Why these incentives were not passed on by reducing the value of Indigo 'CS' Cars? Ans: I will not comment on this. Q. NO. 22 Please state as to whether Indigos (except Indigo 'CS') and UV's attract higher rate of Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the purview of Commercial Department, headed by Mr. Krishnan, Sr. VP (Commercial-PCBU), who has taken this decision. Q.No. 13 You are now being shown the statement, dated 02/03/2010 of Mr. C. Ramkrishnan, CFO, M/s. TML, wherein, he has stated that, Shri Rajiv Dube, President, Passenger Car Marketing has authorized the policy of payment of incentives earned by the dealers on Indica vehicles, by way of reducing the value of Indigo vehicles only'. Further, vide summons dtd. 22/03/2010, you have been asked to submit copy of such policy. Please produce the same. Ans: I can only say that the impression that any such policy was authorized by me is perhaps a mistaken one by Mr. Ramkrishnan, CFO, M/s. TML, as he joined the company later in 2007. I have already stated that I am not aware of any such formal policy sanction at my level and therefore, am not in a position to produce the same. Q.No. 14 You are now being shown statement dtd. 18/03/2010 of Shri S. Krishnan, Senior Vice President (Commercial) of M/s. TML has in his statement accepted that the incentives earned by the dealer for both the brand were given to the dealer by way of reducing the transaction val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arketing'. However Shri Rajiv Dube, in his statements dtd. 29/04/2010 has stated that, 'he has carried a mistaken impression and no such policy exists. As Managing Director of the company, please clarify the stand of M/s. TML on this issue. Ans: Shri S. Krishnan, as Head of Commercial Operations is responsible for taking such decisions and I shall go by his statement dtd. 18/03/2010. Q. No. 5 Shri S. Krishnan, Sr. Vice President - Commercial of M/s. TML in his statements dtd. 18/03/2010 has stated that the incentives earned by the dealers on both the brands, i.e. Indica and Indigo were given to the dealers by way of reducing the 'transaction value' of Indigo vehicles (except INDIGO CS) only. However, he has refused to answer as to why it was done so. Please state the official stand of M/s. TML on the reason for the above. Ans: Since Shri S. Krishnan is the person closest to this matter, I shall go by the statement dated 18/03/2010 of Shri S. Krishnan. Q. No. 7 Are you aware that the price reduction of Rs. 1.00 lakh on Indigo cars (except Indigo CS) was never passed on to the ultimate consumer of the cars? Ans: Since this is operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the policy of passing on the incentives by way reduction in the transaction value of Indigo cars was as per his verbal instructions and the figures of price reduction of Rs. 30000/45000/100000 were arbitrary figures arrived at by him to pass on the incentives. Thus the top management of TML, barring Mr. Krishnan, were completely ignorant or unaware of how the discounts were determined and passed on to the dealers. If that be so, it is unimaginable how the dealers could have come to know about the quantum of discount or its delivery mechanism. From these evidences on record, it is clearly established that the so called discount circulars claimed to have been circulated to the dealers as submitted by Sri. Krishnan and Sri. Kulkarni were false and fabricated documents just to hoodwink/mislead the investigation. The appellant has relied on their Chief Internal Auditor's report wherein certain internal enquiry was conducted after the investigation started. It is claimed that it is part of their ethics programme of good governance and as per the said report, the entire scheme of special discount was in accordance with the company policy. The documents available on record and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. TML. 5.13 At the time of hearing, it was claimed that the dealers of TML were aware well in advance of the discount structure before removal of the goods. In support of this claim, attention of the Bench was invited to certain Monthly Circulars claimed to have been issued to the dealers. As seen, these circulars are addressed to the Regional Managers of TML with advice to inform the dealers of the incentive structure for the month. One such circular is reproduced below for ease of reference: Description: Legal Corner Icon 5.13.1 According to the revenue, these circulars are false fabricated. These were created only to tell the investigation that the dealers were aware of the discount structure before removal of the goods. According to the revenue even the senior officials of TML were not aware of these circulars. Perusing the relevant record, particularly, the statements of some of the Dealers, Regional Managers and Senior Officials of M/s. TML as noted in the foregoing paragraphs, it does not appear that TML was issuing any Monthly Discount Circulars to its dealers. On the contrary, each of the deponents whose statements were recorded has categorically stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not also envisage any such scheme. (8) There is also no evidence on record to show that the goods on which the discounts were given (by price reduction of cars) while effecting sales to the dealers were passed on to the customer, that is, buyers of the cars. In fact the evidences available on record prove the contrary. (9) An attempt, was made to mis-lead the investigation by submission of false/fabricated circulars claimed to have been issued to the dealers the receipt of which has been denied by all the dealers. Even the Regional Sales Managers who were directed to circulate the same were not aware of their existence as also the top management who were directly concerned with the business operations of the appellant firm. 6. It would be useful at this juncture to look at the settled position in law with respect to admissibility of discounts. Though the new section 4 effective from 1-7-2000 and the transaction value do not specifically refer to any trade discount, the transaction value, being the net amount received after giving the discount, would be influenced by the discount. Thus it would not be unreasonable to say that the concept of trade discount is in-b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would be acceptable. The said decision of the Tribunal was affirmed by the Hon'ble Apex Court. 6.4 A Larger Bench of this Tribunal in the case of Maruti Suzuki India Ltd. [2010 (257) ELT 226 (Tri-LB)] had an occasion to examine the scope of transaction value as defined in section 4 of the Act (after its amendment with effect from 1-7-2000) and held as follows:- 15. The definition of the expression transaction value undoubtedly uses the expression any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including.......... servicing, warranty, commission or any other matter,........ Apparently, the transaction value does not merely include the amount paid to the assessee towards price but also includes any amount a buyer is liable to pay by reason of or in connection with the sale of the goods, including any amount paid on behalf of assessee to the dealer or the person selling the vehicles. Measure of levying is expanded and its composition is broad based to bring all that a buyer is liable to pay or incur by reason of sale or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not passed on to the end customers; and it is not passed on as a price reduction of the goods to which it pertains to. Thus the so called special discount claimed to have been passed on by the appellant to the dealers is not a trade discount at all so as to be eligible for exclusion from the assessable value of the goods removed as per the provisions of section 4 of the Central Excise Act. Therefore, denial of abatement of the said discount from the assessable value of the goods sold is clearly sustainable in law and accordingly, we uphold the demand for differential duty confirmed in the impugned order, Arguments to the contrary made by the appellant in this regard merits total rejection. The appellant has relied on a number of judicial pronouncements in support of their claim that the special discount is a permissible trade discount. We have already given our reasons, both factual and legal, why this contention is not acceptable. Therefore, we do not find it necessary to discuss each individual decision and give a finding as to why it is not relevant or acceptable. Once the demand for differential duty is upheld, the liability to pay interest thereon is automatic and consequentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/2003 related to performance bonus granted to the dealers by way of a flat discount of Rs.20000/- per car based on the number of vehicles purchased by the dealers in 2001-02 and thereafter. The criteria governing the said scheme was sales performance, spare parts performance, performance of receivables and so on. The criteria governing the car target and retail schemes include services rendered by the dealers to the customers on behalf of the appellant manufacturer such as warranty services, insurance services, financial services, loyalty and exchange bonuses and the quantum of discounts vary from month to month and year to year. Thus the schemes were significantly different, both in form and content. Further as discussed in the preceding paragraphs, we have concluded that the quantum of discount and the method of its dispersal were not known to the dealers. Further, Sri. Krishnan in his statement dated 18/3/2010 had admitted that it was he who formulated the new scheme in 2006 to meet the fierce competition faced by them. It is not in dispute that the appellant did not declare or inform the department about the new incentive scheme at any point of time either through letters or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imitation which is sought to be read into the provision by some of the orders of the Tribunal also cannot be permitted in law when the statute itself has provided for a fixed period of limitation. It is equally well settled that it is not open to the Court while reading a provision to either rewrite the period of limitation or curtail the prescribed period of limitation. 7.1 It is also on record that the appellants themselves had admitted to part of the duty liability and had paid the same along with interest and 25% of the penalty during the investigation stage which is a clear pointer to the admission of guilt on the part of the appellant. Further, the appellant resorted to subterfuge by fabricating false documents to mis-lead the investigation. This conduct of the appellants also clearly establishes both suppression and willful mis-statement on their part to evade excise duty. 7.2 It is worth out while to remember the ratio laid down by the hon'ble Apex Court in the Mcdowell And Co. Ltd. vs. Commercial Tax Officer [AIR 1986 SC 649], wherein it was held as follows:- .In our view, the proper way to construe a taxing statute, while considering a device to avo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, are held liable to confiscation under Rule 25 of the said Rules and the persons concerned are aware that the goods are liable to confiscation. Neither in the show cause notice nor in the impugned order, is there any proposal to hold the goods liable to confiscation nor any finding to that effect. In the absence of such a finding, imposition of penalties on the said officials of the appellant firm cannot be sustained in law. Accordingly, we set aside the penalties imposed on the co-appellants. 8. To sum up, we uphold the confirmation of duty demand of Rs.59,00,94,013/- on M/s Tata Motors Ltd. under section 11A of the Central Excise Act, 1944, invoking the extended period of time along with interest thereon under section 11AB of the said Act. We also uphold the imposition of penalty under section 11AC on M/s Tata Motors Ltd. However, the penalty payable shall be only Rs.45,34,89,642/- after considering the payment of penalty of Rs.3,41,26,093/- [being 25% of the duty amount of Rs.13,65,04,371/- paid by the appellant along with interest thereon before the issue of show cause notice]. We set aside the penalties imposed on the co-appellants Mr. S. Krishnan, Mr. Rajesh Bagga and Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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