ORDER
T.K. Jayaraman, Member (J)
1. This appeal is filed against the Order-in-Appeal No. IND-1/331/2003 dated 17.6.2003, passed by the Commissioner (Appeals)-I, Customs & Central Excise, Indore.
2. The appellants are engaged in the manufacture of P or P Medicines, an excisable commodity. They introduced a scheme titled ‘Special Trade Bonus Scheme’, vide their circular dated 6.3.1997 under which they supplied certain quantities on free of cost to their distributors. In other words, the scheme amounts to a quantity discount scheme. Initially, the scheme was effective from 10.3.1997 to 26.4.1997. However from time to time, the scheme was extended for further periods. The last Para of the said Circular reads as follows:
Please note no credit notes will be given on schemes. In case your are holding stock, you are advised to give scheme on the stock you are holding and place the order for similar amount with the company where we shall give you scheme. The stock which you have given on scheme should be replenished with the stocks which you will receive on scheme from the company.
As can be seen, initially when the scheme was started, the distributors were allowed to use the duty paid stock with them to give effect to the scheme as per the circular. However, the appellants would later replenish the goods to the distributors. The Department took objection to do saying that the replenishment on free supplies made by the distributors of the stock held by them at the commencement of scheme, March 1997 is not permissible as per Section 4. The Revenue proceeded against the appellants. The period involved is April 1998 to March 2000. The Revenue proceeded against the appellants. The period involved is april 1998 to March 2000. The duty of Rs. 15,51,271/- was confirmed and the penalty of Rs. 1,00,000/- under Rule 173Q of the Central Excise Rules, 1944 was imposed by the Original authority. When the appellants approached the Commissioner (Appeals), he passed the impugned order confirming the order of the Original authority. The appellant has strongly challenged the orders of the Original Authority and also the first Appellate authority.
3. Shri K. Parameswaran, the learned Advocate appeared for the appellants and Shri L. Narasimha Murthy, learned SDR appeared for the Revenue.
4. The learned Advocate made the following submissions:
(1) The orders have been passed by placing erroneous reliance on Circular issued by the Appellant dated 6.3.1997, which ceased to be effective much prior to the period involved herein and by ignoring the relevant trade circulars issued in this regard.
(2) It is also erroneously assumed that even though no such clause was there in the subsequent circulars issued from 31.3.1998 onwards, the same does not change the nature of transaction.
(3) All the relevant materials placed on record including the circulars and also the quantity given as quantity discount being specifically indicated in the invoices itself have been totally ignored and brushed aside.
(4) No evidence has been adduced to establish that what was given as free supply is only for replenishment of the stock as assumed while passing the order particularly for the period from 1.4.1998 onwards and up to March 2000.
(5) The said discounts claimed as quantity discount was known much prior to the removal of the goods and was even allowed in each and every invoice under which goods were cleared as per the scheme during the said period.
(6) In fact, for the subsequent period involved i.e., April 2000 to September 2000, Commissioner (Appeals), Indore has already allowed the appeal vide OIA dated 23.2.2004.
(7) Since there is no doubt or dispute that quantity discount has been allowed and is also known prior to the removal of goods, the same should be allowed as per principles well laid down in several cases by the Hon’ble Supreme Court/Tribunal. He relied on the following case laws:
(i) CCE v. Hindustan Lever Ltd.
(ii) Bombay Latex & Dispersions v. CCE
(iii) Ponds (India) Ltd. v. CCE 2000 (124) ELT 202 (T)
(iv) CCE v. Hindustan Lever 2003 (108) ECR 191 (T)
(v) CCE v. Hindustan Lever 2001 (137) ELT 961 (T)
(vi) Surya Foods & Agro v. CCE 2003 (156) ELT 488 (T) : 2003 (111) ECR 1062 (T)
(vii) Dabur India Ltd. v. CCE
(viii) Electrolux Kelvinator v. CCE 2004 (60) RLT 264 (T) : 2004 (113) ECR 668 (T)
(ix) CCE v. Nilkamal Plastics
(x) CCE v. Havell’s Electronics
5. The learned SDR fairly conceded the point that quantity discount if it is known at the time of clearance of the goods is definitely admissible.
6. We have gone through the facts of the case. The duty demand covers the period from April 1998 to March 2000. On going through the circular issued, it is very clear that what is given by the appellants to the distributors is only quantity discount. Initially, when the scheme was started the distributors were advised to go with the scheme using the stock which they held. This stock was to be replenished later by the appellants. We do not find anything sinister in this arrangements. There was no allegation by the Revenue that clearance in excess of the allowed quantity in terms of the scheme have been made without payment of duty. This is very clear from the letter dated 7.2.2000 by the Additional Commissioner addressed to the SDR, Bangalore. There was absolutely no reason to reject the quantity discount offered by the appellants in terms of various circulars. The question of replenishment arose only in the initial stage and it was not a permanent feature. Under these circumstances, the orders of the lower authority have no merits. It is also brought to our notice that for the subsequent period i.e., April 2000 to September 2000, the Commissioner (Appeals) has passed a favourable order. Under these circumstances, we allow the appeal with consequential relief.
Pronounced in the court on 12.4.2005