TMI Blog2019 (12) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... es subject to fulfillment of the condition that the contracted quantity is lifted. If both the parties agree to increase the quantity available for discount even though by way of a Minutes of Meeting, holding such discount is not permissible defies any logic. We see that there is nothing significant in the e-mails transacted to show that such a quantity discount was not extended and was only shown to the Customs authorities with an intent to evade payment of duty. As long as the discount is given, in course of the international trade, and as long as there is no flow back of money from the importer to the supplier, such discounts cannot be held to be not permissible as to hold that It is not understood as to why Revenue thinks that to be eligible the discount should be only under a contract. Assessments, once made provisional, shall be provisional for all purposes; there was nothing to stop the Revenue from going through the contracts and seeking further clarification from the appellants on any of the issues. As the appellants have been continuously importing the same item at the same Port over the years, the charge of suppression of fact cannot be sustained. The appellants have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods in the respective contracts and the reduced amount was paid by the appellants to the supplier. Revenue contends the eligibility of such discounts and have issued a Show Cause Notice dated 28.05.2008, proposing to disallow the discounts claimed under Section 4(2) of Customs, Act,1962; seeking duty of ₹ 14,76,598 on account of discounts disallowed and allegation of excess quantity imported along with interest and penalties. The same was confirmed by Commissioner of Customs, Mangalore; vide impugned order No. 38/2008 dated 19.12.2008, along with the interest and penalties. Penalties were imposed on Shri Umesh. K. Shenoy and Shri K.D. Naik. A corrigendum dated 29.01.2008 was also issued. 3. Learned Counsel for the appellants submits that JPMC, the supplier, vide its letter dated 10.07.2008, has clearly explained 'Franchise' and 'Quantity Rebate' used in the Contracts; it was also clarified, vide appellant s letter dated 20.03.2007, that Franchise is a commercial term understood by the supplier and the buyer as representing discount given to taking care of small variations in the draft survey between load port and discharge port; this was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. Commissioner of Commercial Taxes, reported at 2018 (10) GSTL 6 (SC), wherein in the context was Sales Tax enactment, it was held that all trade discounts are allowable as permissible deduction and the same cannot be disallowed merely because discount was not deducted from each invoice. An assessee must establish from its accounts that discount relates specifically to sales with reference to which it is allowed and the discount must be in regular trade practice of dealer or contract or agreement entered into in particular case. 3.3. Learned Counsel for the appellants further submits that the value declared by the appellants represents the true and correct value of the goods in question; it is also not in dispute that the Appellants have not paid any amount over and above the invoice price to their supplier either directly or indirectly; it is also not the case of the department that the Appellants and the supplier are related to each other; prices declared in the Bills of Entry, satisfy all the criteria laid down in Section 14 of the Customs Act, 1962 and therefore, to be accepted; department has committed a fundamental error while trying to add the discounts allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supply Contracts had stipulated addition in the quantity of goods when imported as a result of moisture content that would account to 1% to 3% of the total quantity of the goods received; there are also possibilities of short receipt of the goods, because of its hygroscopic nature; it was agreed between the parties after considering several factors that that the quantity ordered could be plus or minus 10% as per the contract; in some shipments quantity lifted for a particular contract was less and in some cases in excess; at no time, the appellants neither mis-declared the assessable value of the goods, nor had not declared the excess receipt with an intent to evade payment of duty. 3.5. Learned Counsel for the appellants further submits that the demand of duty is barred by limitation; the show cause notice is dated 28.05.2008, demanding differential customs duty in respect of the imports made between 2001 and 2007; though the assessments were provisional, the assessments in respect of 21 Bs./E was finalized on 17.04.2007; Section 28 of the Act is to reckon from 17.04.2007, the demand in respect of these 21 Bs/E a barred by limitation; the findings of the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 111(m) is established to be untenable, no penalty can be imposed under Section 112(a), 114A of the Customs Act, 1962; since the demand of duty itself is not maintainable, the demand for interest under Section 28AB is also not maintainable. 4. Learned AR, appearing for the revenue, reiterates the findings of commissioner in the OIO and submitted a written brief containing the claims of the appellants and rejoinder. He submits that the impugned order was issued after detailed investigation and elaborate discussion on the factual and legal aspects of the various issues uncovered; there was deliberate attempts by the importer in availing undue and abnormal discounts, suppression of information related to the contracts signed, mis-declaration of value, non-declaration of excess quantity received and misinformation to the Customs for requesting for Provisional assessment. 4.1. On the claim of Franchise discounts, Learned AR submits that the franchise claimed as discount by the SCL is an abnormal discount and involves the situation covered under Rule 4(2) (a) and Rule 4(2)(b) of the CVR, 1988. The commercial invoices did not give par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discounts in the guise of franchise and quantity rebate and hence it is not the actual transaction value under Rule 4 of the CVR read with section 14 of the Customs Act and hence to be rejected and re-determined as per Rules 5 to 8 of CVR; Rule 5 could not be taken as no price of identical goods imports available; Rule 6 could not be taken as data on similar goods also not available; Rule 7 and 7A also cannot be invoked; Hence proceeded under Rule 8, by using reasonable means as per the CVR; The actual and true transaction value was arrived at by adopting the basic contracted sale price by disallowing abnormal discounts, claimed without any basis in the contract and without satisfying the contractual conditions; department did not propose to add any amount to arrive at the transaction value; thus, the Rule 8 was correctly invoked in arriving at the transaction value. 4.4. Learned AR further submits that the appellants adopted two different pricing for cargo of the same consignment having the same origin, quality and specifications; appellants relied on the price of the expired contract (for which obligations were already completed) for 5000 MT of rock phosphate impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d perused the records of the case. We find that the appellants have imported 26 consignments of Rock Phosphate from M/s JPMC, Jordan under contracts. Brief issues that require consideration in the instant case are as to whether the appellants are eligible for Franchise Discount and Quantity discount on the imports of rock phosphate made by them at karwar port and whether extended period is invokable in the instant case. Whereas the appellants submit that the discounts are genuine; discounts under any name are to be allowed and that they have not paid over and above the contracted price. 6. Learned commissioner finds in respect of Franchise discount that the contract does not define franchise; it is not openly disclosed in the documents or to the department; the adjustments were hidden and disclosed in each invoice; though it is supposed to be a compensation for short received quantity as stated by Shri N.D. Naik, it was availed in respect of imports per MV Pearl Luck an MV Thorsky even though excess quantity was discharged; No such discount was availed before 1999, when there was no duty on import of Rock Phosphate; the term Franchise discount is unheard in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny condition attached to the discount, it cannot be denied on the basis of a statement of an officer of the appellants that it is for the sake of taking care of the difference in quantities. We find that Apex Court in the case of Bombay Tyre International (supra) and Purolator India Ltd (supra) held that discount, under any name, if passed on, cannot be disallowed. Going by the ratio of the cases, we find that the Franchise is a discount and has been passed on to the appellants. In the absence of any allegation to the effect that supplier and appellants are related, such discount cannot be disallowed. 8. Learned commissioner observes on the issue of quantity discount that the appellants have claimed the discount retrospectively in the last shipment; the appellants did not seek for provisional assessment on this basis, though they sought the same subject to production of documents; the appellants claimed discount, in terms of contract dated 28.4.2004, for 45000MT was already terminated; the appellants on pretext of minutes of meeting 2-3-2006, availed this discount in respect of part consignment of MV Azizia-II; Email dated 20.3.2006 indicates how the discount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 sent by Sh. N.D. Nayak, Deputy Manager (Sales Logistics) of the appellants to M/s TICL; the said e-mail reads as under: During last shipment, Deputy Commissioner of Customs has not agreed for the adjustment of quantity rebate of USD 45000 saying such adjustment is not acceptable. After a lot of persuasion/discussion/arguments, they have as a special case accepted under protest. It means that they can re-assess during the final audit for the full value of USD 45000 in the last shipment The Department further contends that imports as per MV Lady Nora and MV Sante are not eligible for quantity discount as the imports were not under any contract. 10. As we have found above, the quantity discount was agreed upon by both the parties subject to fulfillment of the condition that the contracted quantity is lifted. If both the parties agree to increase the quantity available for discount even though by way of a Minutes of Meeting, holding such discount is not permissible defies any logic. We see that there is nothing significant in the e-mails transacted to show that such a quantity discount was not extended and was only shown to the Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther clarification from the appellants on any of the issues. As the appellants have been continuously importing the same item at the same Port over the years, the charge of suppression of fact cannot be sustained. The appellants have paid duty as per the discharge quantity at the Port of discharge. There is force in the contention of the appellants that the weight, of the imported item i.e. Rock Phosphate, being hygroscopic in nature, is bound to change as per the climatic conditions. The submissions of the appellant that sometimes they receive in excess and sometimes they receive short are plausible. Therefore, allegations based on excess receipt in the factory are not maintainable. 12. For the above reasons, we find that the discounts availed by the appellants are of commercial nature and no case has been made either on the basis of evidence in the form of higher contemporaneous prices or flow back of money, we find that the discounts have to be allowed. In view of the above, we find that no case is made for demand of duty. Consequentially, imposition of penalty is also not sustainable. Accordingly, the appeals are liable to be allowed. 13. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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