The Ahmedabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in the case of JSL Industries Limited Versus Commissioner of Central Excise & ST, Anand has held that the higher discounts cannot be excluded from determination of assessable value under Central Excise Act.

The bench of Ramesh Nair (Judicial Member) And C.L. Mahar (Technical Member) in a case spanning the period from 1987 to 2000 involving demands exceeding Rs. 35 crores held that the higher discounts cannot be excluded from the determination of the assessable value under the Central Excise Act because the same was given to a related concern and not to third-party buyers.

The appellant is engaged in the manufacturing of excisable goods namely Motor Starters, Switches, Current Transformers etc. falling under Chapter 84 & 85 to the schedule of Central Excise Tariff Act, 1985. The appellant was selling the goods to and through their sole marketing agent.

The agreement was made on principal-to-principal basis in which the goods are sold to M/S. JEPL at a discount in the range of 55 % from the list price which are higher by 8 to 10% vis-a-vis sale to other independent buyers directly. 

Sixty-four show cause notices covering the period from 01.04.1987 to 13.03.1996 and 01.04.1997 to 30.06.2000 were issued to the appellant involving total duty of Rs. 3,00,00,799 on the grounds that marketing agent was a related person and the normal price of the goods sold by the appellant should be taken as the price at which the goods were sold by marketing agent. 

It was also alleged that this additional discount of 8 to 10% was nothing but in the nature of commission as the agreement envisages the sale on a principal to agent basis also wherein the same percentage was paid as commission. 

While issuing show cause notice the whole of the list price was taken to be the assessable value for determination of excise duty and differential duty was worked on difference in list price and the value at which duty was paid by the appellant after discounts to JEPL. 

All the show cause notices were confirmed by the jurisdictional Deputy Commissioner in which the adjudicating authority held that there is mutuality of interest between the appellant and JEPL. 

The tribunal held that the 55% discount (including additional 8-10% given in excess of the other buyers) passed on by the Appellant to JEPL for their own purchases is entitled for an admissible deduction on account of trade discount and cannot be considered as a “Commission”.

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Case Details

Case Title: JSL Industries Limited Versus Commissioner of Central Excise & ST, Anand

Case No.: Excise Appeal No. 11908 Of 2016-DB

Date: 04.12.2024

Counsel For Appellant: Abhay Y Desai

Counsel For Respondent: Rajesh Nathan