2014 (12) TMI 234 - AT - Central Excise

Denial of refund claim - Discounts given to customers - Provisional assessment - Finalization of provisional assessment - Duty paid at the factory gate on a higher assessable value while clearing the goods to their depots/consignment agent s premises as at that time the quantum of permissible deduction was not known - Held that - deduction of turnover discount is admissible even if such discounts are not given in the invoice but are subsequently paid to the buyers by issuing credit notes for the equivalent amounts. Thus the impugned order in so far as upholding the deductions of these discounts is concerned is correct. Neither in the order passed by the Assistant Commissioner nor in the order passed by the Commissioner (Appeals) any refund arising out of finalization of the provisional assessment has been sanctioned. In terms of sub-rule (6) of Rule 7 of the Central Excise Rules if finalization of provisional assessment results in some amount becoming refundable this refund would be subject to the principles of unjust enrichment and it will be payable to the assessee only if the incidence of the excise duty whose refund is sought has not been passed on to any other person. Thus the finalization of the provisional assessment and grant of refund if any arising on account of finalization of provisional assessment are two separate issues and should not be mixed-up. Assistant Commissioner and the order-in-appeal passed by the Commissioner (Appeals) are purely on the issue of admissibility of the discounts for deduction. Just because on permitting the deduction of these discounts while finalizing the assessment some duty becomes refundable and it appears that the refund that amount is not payable to the assessee for the reason that he had passed on the incidence of that duty to the customers the deduction of the admissible trade discount cannot be refused and what is to be refused is the refund. The department has mixed-up the two issues which is not correct. In fact the grounds on which the order of the Commissioner (Appeals) is sought to be challenged are absurd. The appeal filed by the Revenue is therefore without any merit. - Decided against Revenue.

Summary

Issues:
1. Admissibility of turnover discount and trade discount for deduction in provisional assessment finalized by Assistant Commissioner.
2. Review appeal filed before Commissioner (Appeals) challenging the deductions allowed in the provisional assessment.
3. Dispute regarding entitlement to deductions based on the collection of total duty amount from buyers.
4. Arguments presented by both sides regarding the correctness of the impugned order.
5. Interpretation of legal provisions and relevant case laws supporting the admissibility of discounts for deduction.
6. Clarification on the distinction between finalization of provisional assessment and grant of refund.
7. Conclusion of the Tribunal on the merit of the Revenue's appeal and the dismissal of the appeal and stay application.

Analysis:
1. The case involved a dispute over the admissibility of turnover discount and trade discount for deduction in the provisional assessment finalized by the Assistant Commissioner. The respondent, engaged in the manufacture of Ayurvedic medicaments, provided various discounts to customers through credit notes issued to dealers. The Assistant Commissioner permitted these deductions in the finalization of the provisional assessment for the financial year 2011-2012.

2. The Revenue filed a review appeal before the Commissioner (Appeals) challenging the deductions allowed by the Assistant Commissioner. The main argument was that since the respondent collected the total duty amount from buyers, they were not entitled to any deductions. The Commissioner (Appeals) rejected the Revenue's appeal, leading to the filing of the current appeal.

3. The key contention revolved around whether the respondent, by collecting the full duty amount from buyers, should be eligible for deductions. The Revenue argued that the practice was incorrect under Section 11D of the Central Excise Act, as the duty collected should be paid to the credit of the government. However, the respondent defended the deductions by citing relevant case laws supporting the admissibility of turnover discount even after the clearance of goods.

4. After considering the submissions from both sides and reviewing the records, the Tribunal found that the discounts provided by the respondent were admissible for deduction based on established legal precedents. The Tribunal clarified that the finalization of the provisional assessment and the grant of any refund were separate issues and should not be conflated.

5. The Tribunal emphasized that the Revenue's appeal lacked merit, as the grounds challenging the deductions were deemed absurd. The decision highlighted the importance of distinguishing between the admissibility of trade discounts for deduction and the eligibility for a refund based on the principles of unjust enrichment.

6. In conclusion, the Tribunal dismissed the appeal and the stay application, upholding the impugned order that allowed the deductions of turnover discount and trade discount in the provisional assessment. The decision was pronounced in the open court, marking the resolution of the legal dispute in favor of the respondent.