1999 (10) TMI 341 - AT - Central Excise

Summary

Issues:
1. Assessment of excise duty on grey yarn manufacturing.
2. Inclusion of dyeing expenses and commission in the assessable value.
3. Treatment of trade discount and cash discount in arriving at the assessable value.

Analysis:

Issue 1: Assessment of excise duty on grey yarn manufacturing:
The appellants, manufacturers of cotton and acrylic grey yarn, were involved in clearing grey yarn from their factory to depots. The key contention was the period from March 1994 to August 1994, during which 95% of the grey yarn was sold to wholesale dealers and 5% was sent to job workers for dyeing. The authorities demanded duty by adding dyeing expenses, commission to agents, trade discount, and cash discount to the assessable value. The adjudicating authority and appellate authority upheld this demand. However, the Tribunal clarified that the cost of dyeing incurred subsequently cannot be added to the value of grey yarn for assessing duty, emphasizing that the job worker carrying out the dyeing process should be liable for duty, not the manufacturers.

Issue 2: Inclusion of dyeing expenses and commission in the assessable value:
The Tribunal confirmed that commission paid to agents for promoting the business should not be deducted from the assessable value, as it should be added to the value for assessing duty. However, the expenses of dyeing and commission should not be included in the assessable value of grey yarn manufactured by the appellants. The Tribunal set aside the orders that added dyeing expenses to the assessable value, emphasizing that the duty on dyeing operations should be levied on the job worker, not the manufacturers.

Issue 3: Treatment of trade discount and cash discount in arriving at the assessable value:
Regarding the trade discount and cash discount given by the appellants to their dealers, the Tribunal noted that these discounts should be deducted from the price to determine the assessable value. The authorities failed to ascertain the actual amount of trade discount given to dealers, irrespective of its nomenclature. The Tribunal emphasized that trade discounts, regardless of their description, should be allowed to be deducted from the sale price, as per the Supreme Court decision in U.O.I. v. Bombay Tyres International. The matter was remanded back to the adjudicating authority to determine the actual trade discount given to dealers.

In conclusion, the Tribunal allowed the appeals, setting aside the inclusion of dyeing expenses in the assessable value and remanding the matter back to the adjudicating authority for further assessment based on the principles of natural justice. The appeals were disposed of accordingly.