Admissibility Of Discounts Passed On To Buyers Subsequent To Clearance, Is Eligible Deduction For Determination Of Assessable Value: CESTAT

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the admissibility of discounts that were passed on to the buyers and were known at the time of clearance of goods is an eligible deduction for the purpose of determining the assessable value.

The bench of Ashok Jindal (Judicial Member) and Rajeev Tandon (Technical Member) has observed that the rebate, as it was known by way of MPR and uniformly passed on, would be required to be taken note of for the determination of the assessable value.

The appellant/assessee is a manufacturer of iron and steel articles like pig iron, ingots, blooms, angles, channels, etc., falling under Chapter 72 and Chapter 73 of the Central Excise Tariff Act, 1985. The products manufactured by the appellants are sold by them at the factory gate as well as through their depots and branch sales offices (BSOs) by way of stock transfers for onward sale.

The appellant submitted that the pricing of the goods is determined by their Central Marketing Organization (CMO), which decides the prices at which the goods are required to be sold from the plant as well as the depots and BSOs and accordingly releases the price lists for the various goods for sale.

The appellant contended that, apart from the price list, the CMO allows the plant as well as the depots and BSOs to provide further discounts uniformly to all buyers on the prices indicated in the price lists so as to match the prices of the competitors located at various places. Thus, at the time of sale of goods from the depots, plants, or BSOs, the list price is adjusted by giving different rebates or discounts, referred to as Movement Plan Rebates (MPR).

This adjustment of prices, by way of MPR, is worked out by a high-powered committee comprising the Director-Finance, Director-Commercial, and CEOs of all five integrated steel plants of the appellants, besides other representatives such as ED (Mktg.), ED (F&A), etc.

The appellant submitted that the MPR working out is a very scientific and commercial process and is nothing but a uniformly allowed trade discount, which can also be understood as a rebate; this rebate amount is actually conveyed through the MPR.

The appellant contended that the rebate is allowed in the normal course of trade, both on direct sales as well as dispatches to the stockyards, and is not refundable by the buyers. Also, it is shown separately on the invoices issued under Rule 11 of the Central Excise Rules, 2002.

The department supported the adjudication order and contended that the price adopted for the purpose of valuation by the appellants cannot be construed as the normal transaction value.

As per Section 4(1) of the Central Excise Act, 1944, the assessable value is the transaction value at which goods are sold by an assessee for delivery at the time and place of removal, whereas the transaction value is the price actually paid or payable for the goods. In the instant case, as the goods are not sold from the factory gate and the depot/BSO is the actual place of sale, the assessable value would therefore be required to be determined in terms of Section 4(1)(a) of the Act in accordance with the provisions of Section 4(1)(b), read with Rule 7 of the Valuation Rules, which caters to the sale of goods from a depot to non-related buyers, with price being the sole consideration for sale.

In terms of Rule 7 of the Valuation Rules, any discount given at the time of clearance of goods ought to be allowed for assessment of goods transferred to the BSO when the same is passed on to the final customers.

The tribunal noted that the goods were sold from the depots after allowing such MPRs as indicated on the face of the invoice. Also, the Chartered Accountant's certificate furnished establishes that the cumulative value of the MPRs allowed from the depot exceeded the MPRs as claimed by the appellant.

The CESTAT set aside the order and allowed the appeal filed by the assessee.

Counsel For Appellant: Rahul Tangri

Counsel For Respondent: P.K. Ghosh

Case Title: M/s. Steel Authority of India Limited Versus Commissioner of Central Excise and Service Tax

Case No.: Excise Appeal No. 75377 of 2015

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