ORDER
Moheb Ali M., Member (T)
1. These two appeals are heard together as the issues involved are identical even when the appellants are different. The two appeals arose out of the different orders of Commissioner of Central Excise, Pune.
2. The appellant manufactures Electric Insulation Tapes on job work basis for Bhor Industries Ltd. The goods so manufactured were sold by M/s. BIL some times to the wholesale dealers at the factory gate and also from their depots. Under Notification No. 27/92 dated 9.10.1992 a brand name holder can have his goods manufactured through a manufacturer provided he undertakes to discharge all duties and observe all excise formalities. M/s. BIL has undertaken that responsibility. However the impugned order demands duty from M/s. Bhor Steelgrip Tapes Ltd., the job worker and not from the M/s. BIL the brand name owner who got the goods manufactured.
3. In the impugned order the Commissioner demanded Rs. 1.91 crores towards differential duty, imposed an equal amount as penalty under Section 11AC and Rule 173Q of Central Excise Act and Rules respectively. Confiscated the land, building etc. under Rule 173 0(2) and demanded interest under Section 11AB. The period involved is June 94 to August 98. The Show cause notice was issued on 16.10.98 invoking larger period of limitation. The dispute revolves round valuation of goods for the purpose of assessment under Section 4 of Central Excise Act. The total demand of Rs. 1.91 crores and odd can be roughly divided into following headings.
(a) Depot administration charges not added Rs. 12.83 lakhs by the appellant to the Assesable Value while clearing the goods from the Depots (1.4.94 to 30.9.96)
(b) Discount not admissible on goods stock Rs. 21.23 lakhs transferred to depots (1.1.94 to 31.12.97
(c) Discounts were not passed on in the Rs. 1.57 Crors. Invoices but were passed on through Credit notes for factory gate sales, hence not admissible.
4. The appellants contested the demand both on merits and limitation.
5. Heard both sides.
6. The Ld. Advocate Shri V. Sridharan argued that in regard to the demand at (a) above that the appellant sells the goods at the factory gate and also stock transfers them to their depots. The base price charged for the goods at the factory gate and the depots is the same. For the goods sold from the depots, administrative charges are collector over and above the base price. Excise duty was not paid on such charges. Relying on the decision of the Supreme Court in the case of Indian Oxygen Ltd. [1988 (36) ELT 723] he argued that when ex-factory price is available the price at which goods are sold from the depots is irrelevant for the purpose of ascertaining the assessable value. He argued that during the relevant period the place of removal was the factory gate and a wholesale price at which goods were sold at the factory gate alone formed the assessable value. He also submitted that the demand is time barred as the fact that Depot administrative charges are collected in addition to the base price was indicated on the challan cum invoices issued under Rule 52A of Central excise Rules. All the invoices were submitted along with the RT 12 return to the Department suppression therefore cannot be alleged. What is already known to the department cannot be held to have been suppressed by an assessee Pushpam Pharma [1995 (78) ELT 401] relied upon.
7. In regard to (b) above it was argued that disallowing entire trade discount passed on to a buyer for ex-depot sales on the ground that in such cases it is not known at the time of removal (the factory gate) as to whom the goods will be sold ultimately, is not in accordance with the judicial pronouncement on the issue. The Ld. Advocate argued that when such depot sale price is being considered for the purpose of computing duty, discount allowed for the sales from the depots should be also considered. The issue according to him, is settled in the decision of Bombay High Court in the case of Goodless Nerolac Ltd. v. Union of India [1993 (65) ELT 186 affirmed by the Supreme Court in [1994 (73) ELT A58 He argued that suppression on the part of the appellant cannot be alleged in the face of the discounts claimed on the invoices under which goods are stock transferred to Depots.
8. In regard to (c) above where trade discounts passed on by way of credit notes were disallowed, it was argued that the Commissioner’s contention that discounts passed on by way of credit notes were not known to the buyers the time of removal of the goods and therefore not admissible under Section 4, is incorrect for a variety of reasons. He referred to the various trade circulars issued by the appellant during the relevant time and argued that the discount as stated in the trade circulars were made known to the buyers in advance and therefore were known to the buyers at the time of removal of goods. These discounts were known to the buyers but were quantified later on in certain types of sales and it is for this reason the invoices do not show the discounts. The CEGAT in the case of Assam Asbestos Ltd. v. Collector of Central Excise [1993 (63) ELT 141 (Tribunal)] held that discount given in credit notes is an admissible discount. It was further argued that trade discount need not be uniform (Metal Box of India v. Collector of Central Excise 1995 (75) ELT 449 relied upon). Similarly discount claimed in the price list on average basis subject to quantification of later on is an admissible discount as held in See Samtel v. CCE [1998 (78) ECR 943 and Nalco Chemicals India Ltd. v. CCE [1998 (104) ELT 730]. In any case it was submitted that the demand is time barred as the sales policy of the appellant was filed with the department the details of which indicate the basis for claiming discounts. Further the invoice cum-challan filed by the appellant along with the RT12 clearly indicate that the discounts are passed on in the manner in which was done and therefore suppression cannot be alleged.
9. The Ld. DR strongly supported the impugned order. He argued that in so far as of discounts passed on by way of credit notes they are clearly inadmissible under Section 4 of the Act. It is settled law that discount should be known in advance and such discount should be said to be known only when it is shown in the invoices at the time of removal. The appellant passed on discounts which are not uniform and therefore such discounts are inadmissible.
10. We observe at the outset that the entire demand is hit by limitation as argued by the Ld. Advocate. From the facts as brought out in the show cause notice and on the impugned order we are at a loss to see the suppression as alleged, on the part of the appellant. The department while assessing the RT12, which were regularly filed were in the know of the facts namely, goods were stock transferred to depots from where they are sold after adding the depot administration charges, that discounts were not uniform and were passed on by way of credit notes and that the statutory documents issued under Rule 52 A clearly indicated the relevant information. In the face of these disclosures on the part of the appellant larger period is not invocable to raise the demand for differential duty.
11. Even on merits the order of the Commissioner can not be upheld relying on the decisions cited supra. We hold that the demand is not sustainable. When a factory gate price is established (during the relevant time factory gate constitutes place of removal), that price is relevant for the purpose of ascertaining the price at which goods are sold for determining the assessable value. In regard to disallowance of various discounts we observe that the Commissioners order is devoid of merits. The appellant indicated clearly that various discounts at varied rates were being given in advance and hence satisfy the condition that a discount to be admissible should be known in advance.
13. The appeal is allowed both on merits and limitation.
Appeal No. E/1108/02
In this appeal the same issue as narrated in Appeal No. 3631/01 are involved namely Depot administration charges are not included in the assessable value, discounts not admissible as permissible deductions on goods stock-transferred to the depots and discounts passed on through credit notes. The period involved is June 1994 to August 1998. The show cause notice was issued June 1999 invoking larger period of limitation. In the impugned order the total duty demanded is Rs. 2,20,83,474/- with equal amount of penalty. The Commissioner also confiscated the land, building etc. and allowed it to be redeemed on payment of a fine of Rs. 17 lakhs.
For the reason given in an order in appeal No. 3031/01 we set aside the order of the Commissioner and allow the appeal.
Thus appeals No. E/3631/01 and E/1108/02 are allowed.
(Operative part pronounced in Court)