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2016 (4) TMI 55 - CESTAT CHENNAI

2016 (4) TMI 55 - CESTAT CHENNAI - TMI - Valuation - Benefit of abatement - Provisional assessment - Denial of cash discount on the ground that the same is not passed on to all the dealers - Held that:- Once the cash discount is allowed in the invoices, irrespective of the eligibility to the said discount, if any, of the buyer, same is passed on in the invoice itself. Therefore, the valuation provision read with the rules would not envisage rejection of such discounts when the same is not recove .....

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rance of the goods to the dealers and claimed abatement of the said charges and did not pay duty on the same. Therefore, when no duty was paid, initially in view of the provisional assessment, the question of issuing credit notes, including the duty amount on such charges, never arose. The Commissioner (Appeals) has not applied the facts of the case to the issue in question.

Proper finalization of provisional assessment based upon proper computation of assessable value, taking into ac .....

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r all vehicles cleared and each exclusion or inclusion is applicable for every motor cycle, scooter, moped cleared and the original authority should have determined the assessable value by first deducting the abatement element and thereafter arriving at assessable value for calculating the differential duty/excess duty. Reliance made by the appellants in the case of ACCE & Others Vs. MRF (1986 (12) TMI 35 - SUPREME COURT OF INDIA ), wherein it has been held that abatements should be cumulatively .....

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on stock transfer. This tax is nothing but a levy on the finished excisable goods cleared from the factory and therefore excludable from value in t terms of Section 4. The event of taxation is the sale of manufactured final products. The appellant paid the tax as a seller of goods, of course, on the purchase value of inputs. Besides, it is a levy on sale of goods. The abatement for this Tax allowed in the impugned order is correct and therefore, the appeal filed by the department merits dismissa .....

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on mainly two factors (i) various circulars have been issued by the Manufacturer/Appellant regarding granting of such discounts, much before the removal of goods and (ii) even otherwise, the granting of such discounts were known under established practice to the dealers. The findings of the Commissioner (Appeals) have not been rebutted by the revenue in their grounds of appeal. - E/472 to 477/2009 (Deptt. Appeal) And E/482 to 487/2009 (Assessees Appeal) - Final Order Nos. 40166-40169 & 40178-401 .....

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d mopeds falling under Chapter 87 of CETA, 1985 and they are registered with Central Excise Department and discharged duty for the clearance. The assessee requested for provisional assessment on the final products cleared as they intend to claim certain abatements from the price quoted in the invoice like freight, discounts, turn over tax, tax paid under section 3(4) of TNGST Act and cash discounts and trade discounts and Pre Delivery Inspection (PDI) and Free Service Coupon (FSC). Accordingly, .....

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III) 8/2007 dt. 31.7.2007 1999-2000 56,88,204/- 2. 113/70 (M-III) 21/2007 dt. 27.9.2007 2000-2001 5,57,57,825/- 1,66,37,990/-A. Cess 98,851 3. 114/07 (M-III) 22/2007 dt. 27.9.2007 2001-2002 3,96,72,190/- A.Cess 3,09,939/- 4. 115/07 (M-III) 23/2007 dt. 27.9.2007 2002-2003 4,70,25,781/- A.Cess 3,39,414/- NCCD: 95,756 35,80,771/- A.Cess: 27,975/- NCCD 1,89,154/- 5. 116/07 (M-III) 24/2007 dt. 27.9.2007 2003-2004 2,06,23,453/- A.Cess: 1,61,211/- 20,80,190/- A.Cess: 16,251/- NCCD: 1,30,012/- 6. 113/08 .....

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us discounts are reproduced as under:- S. No. Abatements Original Authority First Appellate Authority Pre- 1.7.2000 & Post - 1.7.2000 Pre - 1.7.2000 & Post - 1.7.2000 1. Equalized Freight Allowed Disallowed - Disallowed 2. Turn Over Tax Allowed Allowed - 3. 3(4) Tax Disallowed Disallowed Allowed Allowed 4. Cash Discount Allowed Disallowed - Disallowed 5. Trade Discount Disallowed Disallowed Allowed Allowed 6. FSC Allowed Disallowed - Disallowed 7. PDI Allowed Disallowed - Disallowed 4. A .....

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f TNGST Act and trade discounts. 5. Learned counsel on behalf of the assesse submitted a written synopsis dated 16.12.2014 and also submitted paper books of case laws relating to issue-wise and Annexures Vol. 1 to 12 submitted along with paper book. He reiterated the Synopsis and submitted that though they have units both at Hosur and Mysore but the marketing pattern is same for both the units. As far as Hosur unit is concerned, which is the subject matter of the present appeals, the motor vehic .....

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om depot to dealers premises or from factory to dealers premises. He submits that as per section 4 of Central Excise Act, 1944 freight is to be excluded from the transaction value. Since the equalized freight will be known at a later date. Accordingly, they claimed deduction. Department disallowed the claim on the ground that it is not separately indicated in the invoice at the time of removal. He relied on the decision of the Tribunal in their own case vide Final Order No. 1860/2006 dated 3.1 .....

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count. He submits that they are not required to prove that the discount is actually passed on or not. He submits that the issue is already settled by the decision of the Larger Bench in the case of CCE, Ahmedabad - III Vs. Aravind Mills Ltd. - 2006 (204) ELT 570 (Tri. - LB) wherein the Larger Bench held that cash discounts are to be allowed. He submits that the only condition is that seller and buyer should know in advance about the discount. He submits that the practice is followed by the autom .....

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duty on the PDI charges and FSC. He submits this is factually incorrect. It was neither their submission before the adjudicating authority nor before the appellate authority. He submits that they never collected excise duty element on the PDI/FSC. He also explained with reference to sale price at the time of factory gate and withheld certain amount from the factory price till the dealer has executed PDI/FSC and immediately paid the balance amount by way of credit note as and when dealer submits .....

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towards turnover tax and ₹ 150/- is towards equalized freight and submits that the assessable value is arrived at not after deduction and clearly showed that they have not collected excise duty from the dealer on these PDI/FSC. He submits that the transaction value of the vehicle is at the price on which the vehicles are cleared at the time and place of removal which is their factory gate. He relied on the decision of the Tribunal in their own case vide Final Order No. 25567 to 25569/2013 .....

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and denied and arrived at the net for each discount. At the end of the working he has calculated individually the short paid value and excess paid value for each transaction and demanded duty on the short paid value and whatever the portion where he has allowed the discounts. He failed to adjust the amount instead passed the order and directed the assessee to claim refund subject to provisions. He relied on the decision of ACCE Vs. MRF Ltd. & Ors. -1987 (27) ELT 553 (SC). 10. On Revenue s a .....

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ate of service tax within Tamil Nadu, the taxability under section 3(4) does not arise. In the event of taxability, it is probably on the manufacture of final products and clearance by stock transfer. Therefore, the nature of levy has not changed and it is not a tax on purchase or on raw material. The case laws relied by the Revenue are not applicable. Further, he submits that since the incident of tax is on the manufacturer of finished goods the quantum / computation of 1% tax is calculated on .....

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nd dated 26.7.1999 annexed at pages 31, 32 of Volume - I of paper book and submits that the company comes out with various discounts every year depending upon the season and also for a particular model. Therefore, the discount is already known to the trade before removal. The adjudicating authority taking the view that the invoice does not show the actual discount is not justified as it will be known only after the target is achieved and will be known at a later date and that is the reason they .....

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deduction, he drew attention to statement of facts at paragraphs 5, 6, 7 at page 4 of Revenue appeal and reiterated the grounds of appeal (iii), (iv), (v) and (vi) of Ground - I. He submits that the original authority has rightly disallowed and drew attention to Order-in-Original No. 21/2007 dated 27.9.2007 from pages 46 to 48 of the Revenue appeal. What is to be allowed is deduction only on sales tax paid on the finished goods whereas in the present case, the goods are transferred on stock tra .....

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moval of goods. He relied on the decision of the Hon ble Supreme Court in the case of Govt. of India Vs. Madras Rubber Factory Ltd. - 1995 (77) ELT 433 (SC). 14. On the assessee s appeal, in respect of four issues, that is equalized freight cash discount and PDI/FSC, he reiterated the findings of Order-in-Appeal at page 43 and Order-in-Original No 19/2008 dated 16.9.2008 paragraphs 12, 12.3, 12,4 and 12.5 at pages 56 & 57. He relied the case laws of Maruti Suzuki India Ltd. Vs. CCE - 2010 (2 .....

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tments allegation. He once again reiterated the decision of the Tribunal in theirown case which is in their favour for the equalized freight and regarding cash discount, the Commissioner (Appeals) in fact has allowed the cash discount but only held that the assessee has not passed on the discount. 17. Regarding PDI/FSC, he again reiterated that they have not charged excise duty on the amount of deduction claimed from the customers. He also submits that even though the adjudicating authority has .....

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freight is not allowed for abatement for the period from 1.7.2000 to 28.2.2003. (ii) Cash discount is not allowed for abatement wherever it is not actually passed on for the period post 1.7.2000. (iii) Free service charges and pre-delivery inspection charges are not allowed as abatement when passed through credit notes to the dealers for the period post 1.7.2000. (iv) The order in appeal is silent about the manner in which the provisional assessment is to be finalized and the manner in which th .....

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trade discount as the same were not disclosed to the dealers at the time of prior to removal of goods. 21. The above grounds for appeal by both the sides are dealt with and the findings are given as below: APPELLANT / ASSESSEE GROUNDS: The Commissioner (Appeals) has disallowed the abatement of freight from the assessable value on the ground that for the period up to 28.2.2003 the said element of freight should have been shown separately in invoices. He has relied upon provisions of valuation rul .....

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lute prohibition for denying the abatement on freight in cases where the freight is not shown separately in the invoices. On the other hand, the notice that the rule itself specifically excludes the actual cost of transportation from the place of removal up to the place of delivery of such excisable goods and it requires a condition for showing the freight separately in the invoices, only in cases where the cost of transportation is charged to the buyer in addition to the price. Therefore, we ar .....

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), the Tribunal in the case of National Peroxide Ltd. Vs. Commissioner of Central Excise, Thane, 2013 (298) ELT 423 had allowed the abatement of price even when the freight is not shown separately in the invoices and collected by raising debit notes. (ii) In the case of Cheeramalil Plastics Pvt. Ltd. Vs Commissioner of Central Excise, Cochin, 2006 (206) ELT 406 the Tribunal at Bangalore have allowed the abatement of equalized freight from the assessable value. 22. In the instant case, the appell .....

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is not passed on to all the dealers. Regarding this ground of the assessee/appellant, we find that the said cash discount is granted in the invoices themselves and irrespective of whether the buyer claims the same or is eligible for the same, the said discount is claimed as deduction from the price. The transaction value under section 4 of the Act refers to price paid or payable for the goods removed. It is not the case of the department that whomsoever is not eligible for the discount is asked .....

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d that becomes the transaction value. Therefore, there is no question of rejecting the benefit of abatement of such discount on the ground that the same is not actually passed on to the buyer. In the following decisions, the Tribunal in Larger Bench and other decisions had held that cash discount is abatable irrespective of the fact whether it is availed by the buyer or not. (i) 2006 (204) ELT 570 - (Tribunal - L.B.) in the case of Commissioner of Central Excise, Ahmedabad III Vs Arvind Mills Li .....

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annot form part of the assessable value, so long it is discounted in the invoice itself. In view of the above, we hold that the appellants are eligible for deduction of cash discounts. 2. Abatement of Free Service Charges and Pre-delivery Inspection Charges. We find that in the assessee/appellant s own case, reported in 2016 (331) ELT 3 (SC),/2015-TIOL-299-SC-CX the Honble Supreme Court, in the case of pre-delivery inspection and After-sales service charges (free service charges), have held tha .....

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lue on the presumption that the appellant had collected the entire amount from the dealer in the price charged in the invoice, including duty portion of the same and giving the benefit of non-inclusion, according to the Commissioner, would result in the duty becoming a profit in the hands of the appellant. We find that the above ground for rejecting the benefit is not tenable in view of the Supreme Court decision in the appellant s own case cited above. This bench in the case of M/s. Hyundai Mot .....

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rs and claimed abatement of the said charges and did not pay duty on the same. Therefore, when no duty was paid, initially in view of the provisional assessment, the question of issuing credit notes, including the duty amount on such charges, never arose. The Commissioner (Appeals) has not applied the facts of the case to the issue in question. For the reasons cited above, we do not accept the Commissioner s findings on the said issue. 3. Plea regarding proper finalization of provisional assessm .....

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value from cum-duty value. Abatements are applicable for all vehicles cleared and each exclusion or inclusion is applicable for every motor cycle, scooter, moped cleared and the original authority should have determined the assessable value by first deducting the abatement element and thereafter arriving at assessable value for calculating the differential duty/excess duty. Reliance made by the appellants in the case of ACCE & Others Vs. MRF 1987 (27) ELT 553 (S.C), wherein it has been held .....

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t the said tax should be abated. The Commissioner (Appeals) has allowed the abatement of tax paid under section 3(4) of the TNGST Act on the ground that it is a sales tax and not a purchase tax. It is the case of the revenue that the said tax is not a tax on the final products of the Manufacturer but it is only a tax paid or payable on the materials purchased by the Manufacturer for manufacture of the final products. Section 3 (4) of TNGST is reproduced below:- Section 3(4) Where any dealer, aft .....

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purchased. The liability to pay this tax on the value of input purchased arises only in the event of transfer of final products outside Tamil Nadu, i.e., on stock transfer. This tax is nothing but a levy on the finished excisable goods cleared from the factory and therefore excludable from value in t terms of Section 4. The event of taxation is the sale of manufactured final products. The appellant paid the tax as a seller of goods, of course, on the purchase value of inputs. Besides, it is a l .....

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