Cash discount /Trade Discount, Central Excise

[MUNIRAJ SRINIVASAN]

Dear Sir,

My client has calculated Assessable after deducting cash discount of 3% whether it is allowable under the the valuation rule 4 of the act or after arriving duty amount we will give discount or before duty we have to calculate which is correct?

Posts / Replies

[Pradeep Khatri]

Cash discount permissible

The Central Department has confirmed that cash discount is allowable as deduction, if actually passed on to buyer, if transaction is on principal to principal basis.  CBE&C Circular No. 643/34/2002-CX dated 01-07-2002.

 Discount on quantity, cash and turnover is deductible from assessable value if given under terms of sale or trade practice, known before removal of goods and actually passed on to buyers- Wearwell Tyres v CCE   2009 (12) TMI 416 - CESTAT, NEW DELHI = (2010) 257 ELT 126 (CESTAT).

Cash discount is cost of Finance – In CCE v Pace Marketing Specialities 2004 (167) ELT 401 (CESTAT) also, it was held that cash discount is cost of finance.  It cannot form part of assessable value – same view in Malwa Cotton Spinning Mills v CCE  2007 (10) TMI 209 - CESTAT, NEW DELHI= (2008) 224 ELT 425 (CESTAT).