Excise-Duty Not Payable On Trade Discount Offered To Bulk Buyer Of CNG: CESTAT

The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that excise duty is not payable on trade discounts offered to bulk buyers of compressed natural gas (CNG).

The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) has observed that no evidence is forthcoming that the discount offered by Mahanagar Gas Ltd. (appellant-assessee) to Brihanmumbai Electric Supply and Transport (BEST) was in lieu of the infrastructural facilities extended to them. Hence, the transaction value should be considered the price at which the CNG were supplied by the appellants to BEST, and such a price should be considered the value for the purpose of assessing and discharge of central excise duty liability.

The appellants/assessees have entered into a contract with Brihanmumbai Electric Supply and Transport (BEST) for the supply and sale of compressed natural gas (CNG) through compressors and dispensers supplied by the appellants. The equipment was installed in the depot belonging to BEST with a certain prescribed pressure. For this purpose, BEST had provided space and other civil structures within their premises for establishing the outlets. In terms of the agreement, the trade discount was offered at different rates per kg. for the sale of CNG. The selling rate of CNG fixed for BEST was less than the selling rate of CNG sold from the appellant's outlets to other buyers.

The method adopted by the appellants was interpreted by the Department in the name of 'trade discount'. Since other civil structures were provided by the buyer, i.e., BEST, free of cost, the value of such additional consideration shall be included in the assessable value in terms of Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The appellants were liable to pay central excise duty on consideration.

A show cause proceeding was initiated, seeking confirmation of the duty demand on the appellants. The Show Cause Notice was issued, in which the central excise duty demand was confirmed along with interest on the appellants. On appeal against the original order, the Commissioner (Appeals) upheld the original order and rejected the appeal filed by the appellants.

The issue raised was whether the trade discount offered by the appellants to BEST, being a bulk buyer, can be treated as an additional consideration for the sale of CNG in the event that, due to the technical necessity of the product, the compressors or dispensers are to be installed at the premises of BEST for the supply of CNG to their buses and outside vehicles.

The tribunal held that deduction of trade discount from assessable value was admissible on sale transactions.

The tribunal allowed the appeal in favour of the appellant.

Counsel For Appellant: Payal Nahar

Counsel For Respondent: Rajiv Ranjan

Case Title: Mahanagar Gas Ltd. Versus Commissioner of Central Excise, Mumbai-II

Case No.: Excise Appeal No. 86836 of 2015

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