Judgment:
1. This appeal arises from OIA No. 210/2004-C.E., dated 24-12-2004. The Commissioner, in the impugned order, has rejected the assessees' plea for granting special discounts to a separate class of buyers under Advance Booking Scheme. The said discounts given to a special class of buyers for the period 1-4-2001 to 31-7-2002 involving a differential duty of Rs. 86,39,756/- has been confirmed by the Additional Commissioner including penalty. The Commissioner (Appeals) has reduced the penalty from Rs. 86,39,756/- imposed under Section 11AC to Rs. 50 lakhs and from Rs. 1 lakh imposed under Rule 173Q to Rs. 75,000/- 2. It is the contention of the appellants that they are manufacturers of Hermetically Sealed Compressors falling under CH 8414.30. Apart from direct sales from the factory gate, the compressors are also cleared from the factory on payment of duty to the depots from where they are sold to the dealers. During the lean season i.e. September to December, when the sale of compressors is less, they announce special scheme called as Advance Booking Scheme (ABS in short) under which a dealer who books compressors during the lean period on payment of an advance of Rs. 1500/- per compressor would be given a discount of Rs. 1100/ Rs. 1000/- per compressor which would be supplied during the peak season.
The rate of discount was approximately in the range of 13% to 15%. The ABS discount is communicated to various dealers through Office Orders.
The said scheme is also communicated to the Central Excise department.
Up to 31-3-2001, they were following the practice of paying duty on the assessable value of the compressors without deducting the ABS discount since the Jurisdictional Assistant Commissioner, vide his letter C. No.V/84/17/3/98-Val. had rejected the request for provisional assessment and had directed them to file refund claims for the excess duty paid.
The refund claim was rejected by the Assistant Commissioner. On appeal, the Commissioner (Appeals), vide OIA No. 1/2004, dated 20-1-2004, upheld their contention for deduction and granted the refund. He also held that no duty is payable on the notional interest which would have been earned by the appellants on the advances received by them. The Revenue contested the matter before the Tribunal only on the ground of unjust enrichment. They did not challenge the finding of the Commissioner (Appeals) on the eligibility to the discount under the ABS. The Tribunal rejected the plea of unjust enrichment by their FO No. 1819/2004, dated 17-11-2004. Therefore, it is contended by the learned Counsel that the issue is settled in their favour by the OIA No. 1/2004, dated 20-1-2004 passed by the Commissioner (Appeals) on this issue and the same has not been challenged by the Revenue. It is also contended that after 1-4-2001, the assessee had been clearing the compressors meant for sale to the dealers opting for ABS at the assessable value arrived at after deducting the discounts offered under the scheme. This fact had been informed to the department vide letter dated 31-3-2001. They had also filed a price declaration on 31-3-2001 effective from 1-4-2001 specifically for clearances covered under the ABS. They maintained separate accounts for the compressors cleared for ABS dealers. They had also informed the depots to keep separate stocks for ABS dealers and non-ABS dealers. They had paid duty on the notional interest that would have been earned on the deposits received by them under the ABS. Therefore, they contend that the Show Cause Notice dated 8-4-2002 proposing to demand differential duty is not sustainable for various reasons urged by them. The learned Counsel submits that in terms of Board's Circular No. 354/81/2000-TRU, dated 30-6-2000, they are entitled to deduct the discounts even by the dealers who opt for the scheme. He also refers to the Circular No. 643/34/2002-CX, dated 1-7-2002. He relies on the following 3 rulings:UOI and Ors. v. Bombay Tyre International Pvt. Ltd. 1984 (17) E.L.T. 329 (SC).Perfect Circle Victor Ltd. v. UOI He also submitted that the Tribunal, in the case of CCE v. Dhammpal Satyapal Ltd. , has held that "Advance payment discount" given to dealers is a cash discount only and is an eligible deduction. He relies on the Tribunal ruling rendered in the case of Polyhydron (P) Ltd. v. CCE, Belgaum which also held that where discount is given to those buyers who pay the advance, then it is not the price that is reduced but what is reduced is the value due to the discount given. He again relies on the Tribunal ruling rendered in the case of Nestle (India) Ltd. v. CCE (T) wherein the Tribunal has held that special discount granted to specific contracting parties is an admissible deduction. He also refers to Swastic Fragrance v. CCE (T) wherein the Tribunal has held that discounts allowed under an incentive scheme are eligible for deduction from the assessable value. He also submitted that penalty is not leviable in the facts and circumstances.
3. The learned SDR reiterated the departmental contention and contended that the dealers under the ABS scheme are not a separate class of buyers. Therefore, they are not eligible for deductions. He also reiterated the findings given by the Commissioner.
4. On a careful consideration, we find that the contentions raised by the learned Counsel is required to be accepted. The appellants were paying duty on the value arrived at even under the ABS. They had communicated the same to the department and to the dealers. Their prayer for provisional assessment had been rejected by the Assistant Commissioner in the year 1988 on the ground that they should file refund claims. The refund claims were rejected. However, the Commissioner (Appeals), by Order No. 1/2004-C.E., dated 20-1-2004 upheld their contention for deduction of discount claimed by them under the ABS. The Revenue did not file an appeal on this point. The only ground on which the Revenue had come before the Tribunal was on unjust enrichment. The other plea was also rejected by the Tribunal by Final Order No. 1819/2004, dated 17-11-2004. Therefore, the Commissioner's OIA No. 1/2004, dated 20-1-2004 has become final and in terms of the said order, the appellants are eligible to claim discount under a separate scheme to the dealers who make the advance payments. The scheme is an independent scheme and those dealers who opt for the scheme have to be considered as a special class of buyers. The appellants have already paid notional interest on the advances.
Therefore, the reliance on the Board's Circulars referred to supra which holds that the deductions should be allowed on cash discounts clearly applies to the facts of the case. Furthermore, the ruling of the Apex Court rendered in the cases of Bombay Tyre International Pvt.
Ltd., Madras Rubber Factory Ltd. and that of Perfect Circle Victor Ltd. apply to the facts of the case. The ratio of CCE v. Dharampal Satyapal Ltd. also is on this issue itself. We also find that the discount given by the appellants is to be considered as a special discount granted to specific: contracting parties and is an admissible deduction as held by the Tribunal in the case of Nestle (India) Ltd. v. CCE and that of Swastik Fragrance v. CCE. The order of the Commissioner is not sustainable in law in the light of the judgments and discounts given by us supra. The same is set aside as not legal and proper. The appeal is allowed with consequential relief, if any.
(Operative portion of this Order was pronounced in open Court on conclusion of hearing)