Ingersoll Rand India Limited Vs C.C.E.-Ahmedabad (CESTAT Ahmedabad)
CESTAT Ahmedabad held that trade discount is not includible in the assessable value hence central excise duty is not payable on the same.
Facts- The appellant is manufacturer of Air Compressors, Air Motors, Spares for the Air Compressors, Bus Air Conditioning Systems and parts thereof falling under Chapter 84 of the Central Excise Tariff Act, 1985. It has been contention of the department that the appellant making clearances of the finished goods for the home consumption by two methods (i) direct sales to customers who are actual users and (ii) to distributors appointed by the notice who in turn sold the goods to the actual user buyers. It was noticed by the department that when the goods cleared directly to the actual users, the goods were assessed at the values mentioned in the invoices. However, in respect of goods cleared through the distributors , the distributors were given a discount called “Base Discount” of up to 15% of the price declared in the invoices . Thus it was noticed that there were two sets of assessable value for the same product i.e. the higher value in case of direct sales and discounted value for the clearances made to distributors.
It has been the contention of the department that the discount offered to the distributors as per the agreement between the appellant and their distributors are for performing installation and after sale services within the warranty period of the product. The service of installation and after sale service within the warranty period was required to be provided by the distributor as per the distributor’s agreement and the expense incurred towards such installation and after sale service were to be borne by the distributor and such expenses were not to be reimbursed by the appellant to its distributors. It is further contended by the department that in the case of the direct sales by the appellant to its actual users, the expenses with regard to installation and after sale service during the warranty period are borne by the appellant himself and they are included in the assessable value for the purpose of assessment and levy of duty.
Conclusion-Held that since the sale invoice which have been issued to the distributors by the appellant offering 15 % discount is normally a trade discount and the department has failed to discharge its responsibility to establish that there has been any flow back of consideration from buyer to the appellant. Thus, We find that the transaction value declared by the appellant is correct assessable value for the payment of central excise duty and discount cannot be added to the assessable for charging central excise duty.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The appellant is manufacturer of Air Compressors, Air Motors, Spares for the Air Compressors, Bus Air Conditioning Systems and parts thereof falling under Chapter 84 of the Central Excise Tariff Act, 1985. It has been contention of the department that the appellant making clearances of the finished goods for the home consumption by two methods (i) direct sales to customers who are actual users and (ii) to distributors appointed by the notice who in turn sold the goods to the actual user buyers. It was noticed by the department that when the goods cleared directly to the actual users, the goods were assessed at the values mentioned in the invoices. However, in respect of goods cleared through the distributors , the distributors were given a discount called “Base Discount” of up to 15% of the price declared in the invoices . Thus it was noticed that there were two sets of assessable value for the same product i.e. the higher value in case of direct sales and discounted value for the clearances made to distributors.
1.2 It has been the contention of the department that the discount offered to the distributors as per the agreement between the appellant and their distributors are for performing installation and after sale services within the warranty period of the product. The service of installation and after sale service within the warranty period was required to be provided by the distributor as per the distributor’s agreement and the expense incurred towards such installation and after sale service were to be borne by the distributor and such expenses were not to be reimbursed by the appellant to its distributors. It is further contended by the department that in the case of the direct sales by the appellant to its actual users, the expenses with regard to installation and after sale service during the warranty period are borne by the appellant himself and they are included in the assessable value for the purpose of assessment and levy of duty.
1.3 The departmental was thus, primarily of view that the expenses on installation and after sale service during the warranty period incurred by the distributor, the appellant is passing on such charges in the form of discount to its distributor which should have otherwise forms a part of the assessable value and thereby the appellant have evaded the central excise duty.
1.4 Two Show cause notices came to be issued. The details of which are given in the table here:-
