1. The respondent M/s. Pace Marketing Specialities Ltd. manufacture adhesives, which are liable to Central Excise Duty under Chapter Sub-Heading 3506 of the Schedule to the Central Excise Tariff Act. The duty is on ad-valorem basis. The appellants give a cash discount of 4% to buyers who make prompt payment i.e. within 5 to 7 days of delivery.
This discount was not given to buyers who fail to make payment within the stipulated time. All the same, deduction of the cash discount was claimed while making payment of duty in all cases. Similarly, appellants claimed coin discount on the ground that the value of the coin kept inside each consignment was required to be deducted to determine the assessable value of the goods. The central excise authorities issued show cause notice holding that the deductions claimed by the appellants in respect of cash discount and coin discount were not eligible deductions from sale price and that these amounts should also form part of the value of the goods for the purpose of payment of duty. Demand was confirmed by the jurisdictional Dy.
Commissioner vide his adjudication Order No. 21/2002. The respondent went in appeal to the Commissioner of Customs and Central Excise (Appeals), Ghaziabad. The Commissioner allowed their appeal vide Order-in-Appeal No. 46-CE/GZB dated 7.2.2003 noticing that the Customs, Excise Tribunal had decided the issues in favour of the assessee in their appeal No. E/815/2002-A by Final Order No. 3/2000 NB.A dated 10.1.2003. The present appeal has been filed against that order of Order-in-Appeal at the direction of Commissioner of Central Excise, Ghaziabad.
2. The ground taken in the appeal is that the cash discount in question is not passed on to buyers in majority of the cases on the ground that prompt payment condition was not fulfilled and that the cash discount was retained by the party (ground No. 1). In regard to coin discount, the ground taken is that the coin is packed inside the container and cannot be retrieved without breaking the seal of the container and if zeal is broken, product become un-saleable/unmarketable. With regard to the earlier order dated 10.1.2003 of the CEGAT in the appellants own case on the very issues, it has been stated that this order has not been accepted by the department and appeal against the said order is in process.
3. We have perused the records and have heard the submissions made on behalf of both sides. The same issues had come up for consideration earlier before this Tribunal and under our order dated 10.1.2003 we had held that both the amounts were eligible for deduction from the sale price in order to determine the correct assessable value of the goods.
That order is reported in 2003 (153) ELT 621. Thus, the issue between the parties remains settled by an earlier order of this Tribunal. It has also been stated during the hearing that no appeal has been filed against the said order.
4. The learned SDR has, however, pointed out that our earlier order related to a period prior to the substitution of the Section 4 of Central Excise Act (Valuation Provisions) with effect from 1.7.2000. It is the learned SDK's contention that the criterion under the substituted section is transaction value in each case. He has, therefore, contended that a cash discount, which is not given in a particular transaction, would not be eligible for deduction. He also pointed out that in majority of the cases, as a matter of fact, the discount in fact had not been passed on. The learned SDK has also drawn our attention to clarification in Circular No. 643-34/02-C dated 1.7.2002 of the Central Board of Excise and Customs to the effect that only cash discount, "if actually passed on to the buyers" will be allowed as deduction" (Sl. No. 9 of the table of the Circular). The learned SDR has further pointed out that the definition of transaction value in the substituted section also indicated that the valuation under the substituted section took in its coverage certain post clearance services and costs like servicing warranty etc. He, therefore, felt that cash discount also would be ineligible for deduction.
5. The learned Counsel for the appellants has submitted that, apart from the fact that the issues remains settled inter-party, there is also no warrant in the substituted section for holding that only cash discounts which are "actually passed on" will be eligible for deduction. According to him, inclusion of eligible cash discount would be in the nature of including financing charges in the assessable value of goods. The learned Counsel has pointed out that cash discount is for prompt payment i.e. payment at the time of removal of the goods or within a few days of removal of the goods. It is his submission that only a discounted price qualify to be the price at the time of removal of the goods. He has pointed out that cash discount represented the cost of financing the sale beyond the time of removal of the goods. He has been pointed out that wherever there is delay in recovery of the sale price, the bills covering those sales got discounted and that cash discount is like the bill discounting commission. Learned counsel has submitted that, excise being a levy on the manufacture of goods, the measure for valuation cannot go beyond the sale price at the time of removal of the goods and that financing cost being entirely towards delay in payment by the buyer, it has no relation to the real value or price of the goods at the time of removal of the goods. The learned Counsel submitted that this is clear from the fact that the definition of 'transaction value' in the Finance Bill 2000 included amount payable by reason of "financing" also. However, "financing was deleted before passing bill into Act". The learned Counsel submitted that this background made it clear that, under the new substituted section also there is no warrant to include cash discount in the assessable value of the goods. The learned Counsel for the appellant has also pointed out that this position is clear from the Circular M.F. (D.R.) F. No.354/81/2000 dated 30.6.2000-TRU wherein it has been clarified that the price for delivery at the time and place of removal, where the price is the sole consideration for the sale, would be the assessable value, (paras 2 and 8 of the clarification). The learned Counsel for the respondent has also submitted the contention raised in the present appeal is contrary to settled legal provision. He referred in this connection to the decision of the Hon'ble Supreme Court in the case of Baroda Electric Meters Ltd. v. Collector of Central Excise, 1997 (94) ELT 13 (SC). The learned Counsel pointed out that in that case, the Revenue had claimed that wherever freight actually paid was less than the amount collected by way of freight and transportation charges, the difference was appropriated by the manufacturer and the same would be part of the assessable value. The Hon'ble Supreme Court has rejected this contention noting that it had already been held that in an earlier decision in Indian Oxygen Ltd. v. Collector of Central Excise, 1988 (18) ECC 168 (SC): 1988 (36) ELT 723 (SC) that duty of excise is a tax on the manufacture and not a tax on the profits made by a dealer on transportation. It is the learned Counsel's submission that financing being a separate aspect, from sale, financing cost cannot form part of the assessable value.
6. We find no warrant under the substituted Section 4 and the Rules made thereunder also, for taking a different view on the issues raised in appeal than taken in our earlier order dated 10.1.2003. The measure for valuation under the old Section as well as the new Section is the price of the goods. The statutory measure for value also continues to be the price of the goods at the time of their removal. Cash discount is a discount allowed for prompt payment for the goods. When this discount is reduced from the invoice price, transaction value at the time of delivery of goods is obtained. Otherwise, the invoice price is a future price i.e. a price payable at a later date. The analogy drawn by the learned counsel for the appellants with bill discounting is quite apt. Whether payments are not made at the time of delivery of the goods, the seller discounts the document and gets a lesser price from banks and other bill discounting agencies. Thus, the price received at the time of the removal of the goods is less by the discounting cost.
This is the cost of finance. That cannot form part of the assessable value of the goods, because the assessable value is to be determined with regard to the time of removal. Financing and other costs cannot form part of the assessable value of the goods. That is the law laid down by the Hon'ble Supreme Court in the case of Indian Oxygen v.Collector of Central Excise, 1988 (18) ECC 168 (SC) : 1988 (36) ELT 723 (SC) and Baroda Electric Meters Ltd. v. Collector of Central Excise, 1997 (94) ELT 13 (SC).
7. In the view we have taken above, we find no merit in the present appeal of the Revenue. The same stands dismissed.