Cce & St, Indore vs M/S.Bridgestone India Pvt. Ltd

IN THE CUSPTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI

Date of Hearing/ Decision:04.06. 2015

Excise Appeals Nos.E/55091 and 55213 of 2014-EX(DB)

[Arising out of Order-in-Appeal No.IND/CEX/000/APP/136/14 dated 15.07.2014 passed by the Commissioner of Central Excise (Appeals), Indore]

CCE & ST, Indore Appellants

Vs. M/s.Bridgestone India Pvt. Ltd. Respondent

& Vice Versa

Appearance:

Rep. by Shri R.K. Gupta, DR for the appellant.

Rep. by Shri Tarun Gulati, DR for the respondent.

For approval and signature:

Honble Shri Rakesh Kumar, Member (Technical)

Honble Smt.Sulekha Beevi, Member (Judicial)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

Coram: Honble Shri Rakesh Kumar, Member (Technical)

Honble Smt.Sulekha Beevi, Member (Judicial).

Final Order No.51950-51951/2015 dated:4.6.2015

Per Rakesh Kumar:

The facts leading to filing of these appeals, one by M/s.Bridgestone India Pvt. Ltd. (hereinafter referred to as assessee) and the other filed by the Revenue are, in brief, as under:-

1.1 The assessees are manufacturers of tyres chargeable to central excise duty. The period of dispute in this case is from October, 2011 to December, 2012. During the period of dispute, the assessee were having sales through dealer/C&F Agents. The assessee were giving cash discounts and turnover discounts/turnover discount to their dealers. The quantity discounts/turnover discounts were being given to the dealers buying certain minimum quantity of tyres in a month. During the above period of dispute, the assessee requested the Department for provisional assessment under Rule 7 of the Central Excise Rules, 2002, but the same was refused. In view of this, the assessee, during the period of dispute, paid duty on the value without deducting the discounts, as the same depending upon the volume of purchase made by the dealers in a month was not known at the time of clearance. Subsequently when the appellant were able to quantify the cash discounts and quantity discounts they filed the refund claim of Rs.89,40,810/- for the period October, 2011 to December, 2011, refund claim of Rs.86,01,272/- for the period from Jan. 2012 to March, 2012 and refund claim of Rs.97,01,171/- was for the period from April, 2012 to June, 2012. The jurisdictional Asstt. Commissioner issued three separate show cause notices for rejection of these refund claims which were decided by a common order-in-original dated 15.05.2013 by which the refund claims were rejected on merits as well as on the ground of unjust enrichment. In this order the Asstt. Commissioner held that quantity discounts and cash discounts whose deduction is claimed are not deductible.

1.2 On appeal being filed to the Commissioner (Appeals) against this order, the Commissioner (Appeals) vide order-in-original dated 17.07.2014 while allowing deduction of cash discounts ordered for refund of the excess duty paid holding that there is no unjust enrichment. However, he disallowed the deduction of quantity discount/turnover discounts. While the Revenue is in appeal against the part of the Commissioner (Appeals)s order ordering refund by holding that there is no unjust enrichment and as such the Revenue has not challenged the decision of the Commissioner (Appeals) permitting the deduction of cash discount, the assessee has filed appeal against the part of the Commissioner (Appeals)s order disallowing the deduction of the quantity discount/turnover discount.

2. Heard both the sides.

3. Shri Tarun Gulati, Advocate, ld. Counsel for the appellant, pleaded that as regards quantity discount/turnover discount, as is clear from the Clause in the assessees agreement with their dealers, the same is linked to the dealers buying certain minimum quantity during the month, that there is no linkage between the quantity discount available to a dealer and that dealer having to provide certain facilities and infrastructure at his showroom, that there is nothing in the assessees agreement with their dealers/C&F Agents from which it can be inferred that the quantity discount was subject to the condition of making certain minimum investment on providing certain infrastructure and facilities at the showroom, that the quantity discount, even if it is passed on subsequent to the clearance is deductible and cannot be included in the assessable value, that in this regard, he relies upon the judgement of the Tribunal in the case of Commissioner of Central Excise Vs. Goetze (India) Ltd. reported in 2011 (263) ELT 477 (Tribunal-Delhi), wherein the Tribunal relying the Apex Courts judgement in the case of Government of India Vs. Madras Rubber Factory reported 1995 (77) ELT 433 (SC) has held that the deduction of discount based on turnover which is determined at the end of the year is permissible, even though it is passed on subsequent to the clearance, as the same is known prior to the clearance, that the same view has been taken by the Tribunal in the case of Wearwell Tyres & Tubes Indus P. Ltd. Vs. CCE reported in 2010 (257) ELT 126 (Tribunal-Delhi), that the Tribunal in the case of Kesoram Rayon Vs. CCE reported in 2010 (136) ELT 382 (Tribunal-Kol) has held that cash discount is an admissible deduction from the assessable value as long as the same is being offered to all the buyers who satisfy conditions of scheme and is known to the buyers before the removal of the goods irrespective of whether all the buyers avail of the benefit of the same or not, that the Apex Court in the case of Metal Box India Ltd. Vs. CCE, Madras reported in 1995 (75) ELT 449 (SC) has held that uniformity is not required in trade discounts and that special trade discount provided to bulk buyers is admissible for deduction, that in view of this, disallowing the deduction of quantity/turnover discounts is not correct, that though the assessee offers the quantity/turnover discounts at different rates to different types of dealers depending upon their infrastructure facilities which in terms of the Apex Courts judgment in the case of Metal Box India Ltd.(supra), the assesse are free to do so, that the same view has been taken by the Tribunal in the case of .Hindustan Lever Ltd. reported in 2005 (189 )ELT 434 (Tribunal-Delhi), wherein the Tribunal held that norms and criteria of discount is entirely in the domain of sellers and buyers and tax authorities gain nothing by being privy to those decisions, that for permitting trade discount, what is material is that its policy should be known prior to clearance and this criteria stands satisfied, as the quantum of quantity/turnover discount and its basis available to different categories of dealers is mentioned in the assessees agreement with dealers which have also been placed on record.

As regards the question of unjust enrichment in this case, he pleaded that since the discounts had been passed on by the issue of credit notes to the dealers and those credit notes have not been challenged by the Department, the assesee cannot be said to have passed on to their customers, the burden of excess duty paid by them and whose refunds have been claimed and in this regard he relies on the judgement of Rajasthan High Court in the case of Union of India Vs. A.K. Spintex Ltd. reported in 2009 (234) ELT 41 (Raj), wherein the High Court held that the presumption of passing on the incidence of duty mentioned in the invoice issued under Section 12 A is a rebuttable presumption and once the assesee produces evidence of having borne the incidence of excise duty whose refund claim has been claimed by them, by producing evidence of having issued credit notes to the buyers, the burden would shift to the department to prove that the credit notes are not genuine, that the same view has been taken by the Karnataka High Court in the case of Sudhir Papers Ltd. Vs. CCE, Bangalore reported in 2012 (276) ELT 304 (Kar.), that the ratio of the judgements of the Honble Rajasthan High Court and Karnataka High Court is squarely applicable to the facts of this case and in view of this, the order of the Commissioner (Appeals) that there is no unjust enrichment is correct.

4. Shri R.K. Gupta, ld. Departmental Representative while assailing the impugned order of the Commissioner (Appeals) on the point of unjust enrichment by reiterating the grounds of appeal in the Revenues appeal, defended the Commissioner (Appeals)s order disallowing the deduction of quantity/turnover discount by reiterating the Commissioner (Appeals)s findings in the impugned order and pleaded that the quantity/turnover discount being given by the assessee is in fact reimbursement for the expenses incurred by the dealers in maintaining the certain infrastructure facilities and services at the showrooms in terms of the agreement and, therefore, deduction of this discount is not admissible.

5. We have considered the submissions from both the sides and perused the records.

6. There are two issues involves in this case. The first point of issue is as to whether the quantity/turnover discount being given by the assessee to their dealers and which depends upon the dealers buying minimum certain quantity in a month and which varies from dealer to dealer depending upon certain infrastructure and facilities being maintained by the dealers is includible in the assessable value or not. The second point of dispute is as to whether the refund of duty admissible to the assessee on the basis of the Commissioner(Appeals)s order permitting deduction of cash discount is hit by the bar of unjust enrichment.

7. Coming to the first point of dispute regarding the deduction of quantity discount from the transaction value, there is no dispute that this discount is linked to the quantum of goods purchased by the dealers in a month and the rate of quantity discount varies from dealer to dealer depending upon the dealers obligations to provide certain infrastructure and facilities at the showrooms. The dealers with better infrastructure and service facilities at their showrooms are offered higher discounts. In our view, in accordance with the judgement of the Apex Court in the case of Bombay Tyre International reported in 1984 (17) ELT 329 (SC) and the judgement of the Apex Court in the case of Government of India Vs. Madras Rubber Factory reported in 1995 (77)ELT 433 (SC) for permitting trade discounts what is relevant is that the nature of the discount i.e. the discount policy and its basis should be known prior to the clearance and it is not material that the discount should have been passed on at the time of clearance. In fact, in terms of para-9 of the Boards Circular No.354/81/2000-TRU dated 30.06.2000, discount of any type or description given on any normal price payable for any transaction will not form part of the transaction value for the goods e.g. quantity discount for goods purchased or cash discount for the prompt payment etc. will therefore not form part of the transaction value and what is important is that it must be established that the discount for a given transaction has actually been passed on to the buyer of the goods. The differential discounts extended as per commercial considerations on different transactions to unrelated buyers, if extended, cannot be objected to and different actual prices paid or payable for various transactions are to be accepted for working assessable value.

7.1 Since in the present case, the discount policy of the assessee is known prior to the clearance as the rate of discount is mentioned in the assessees agreements with their dealers and also from the circulars, it is clear that the deduction of quantity discount cannot be disallowed. However, according to the department, the quantity discount being extended by the assessee is a sort of reimbursement to the dealers for maintaining certain infrastructure and service facilities at the showrooms like Air Conditioned Customer waiting space, adequate space for reception, separate space for washroom for customers, computer based accounting software, parking facility for customers vehicles, tyre changer, tyre balancing machine, Nitrogen inflation, tyre alignment machine, rim straightener etc. On going through these agreements with the dealers, we find that there is nothing in the agreements from which it can be inferred that the quantity discounts being given by the assessee to their dealers are a compensation for the expenses incurred by the dealers for maintaining the showrooms in certain manner and providing certain minimum facilities in the showrooms. A manufacturer can always insist on maintenance of certain minimum facilities in the showrooms by its dealers which would result in more sales and which in turn will benefit both, the assessee as well as the dealer. Therefore, we do not accept the Revenues contention that the quantity/turnover discount being offered is compensation by the assesee to the dealers for incurring the expenses on maintaining certain infrastructure and facilities at their showrooms. In view of this, the impugned order disallowing the deduction of the quantity/turnover discount to different is not correct.

8. As regards the question of unjust enrichment, there is no dispute that the discounts have been passed on by the issue of credit notes. Once the credit notes are issued by the assessees to his dealers, the invoice price mentioned in the invoices issued earlier would stand reduced to that extent and in such a situation, the burden of proof would shift to the Department and it would be for the Department to establish that the credit notes issued are bogus. In the present case, there is no such evidence produced by the Department. In view of this, following the judgement of the Honble Rajasthan High Court in the case of A.K. Spintex Ltd. (supra), and the judgement of the Karnataka High Court in the case of Sudhir Papers (supra), we hold that there is no unjust enrichment and that the incidence of higher duty paid by the assessee and whose refund is being claimed has been borne by them and has not been passed on by them to their customers.

9. In view of the above discussion, while the appeal filed by the Revenue is dismissed, the appeal filed by the assessee is allowed.

(Rakesh Kumar)

Member (Technical)

(Sulekha Beevi C.S. )

Member (Judicial)

Ckp.

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