The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the appeals filed by Titan Company Limited and held that the Department cannot insist on strict one-to-one correlation between factory clearances and showroom sales for allowing excise duty abatements towards discounts in the jewellery trade. 

The bench of P. Dinesha (Judicial  Member) and Vasa Seshagiri Rao (Technical  Member) observed that such insistence ignores the “commercial realities” of the jewellery business, where goods are stock transferred to multiple showrooms and sold over a period of time. It further ruled that Chartered Accountant certificates and consolidated sales data constitute valid evidence for proving discounts actually passed on to customers. 

The appeals arose from Order-in-Appeal passed by the Commissioner (Appeals-I), Chennai, which had affirmed denial of abatements towards discounts and confirmed differential excise duty demands relating to provisional assessments for various financial years. The dispute included duty demands of ₹11.27 lakh for FY 2004-05 and ₹47.24 lakh for FY 2010-11. 

Titan’s Jewellery Division at Hosur manufactures branded jewellery under the “Tanishq” brand and clears goods on payment of central excise duty. Since there were no ex-factory sales, the jewellery was stock transferred to company-owned showrooms, franchisees and management agents for retail sale. Due to fluctuating gold prices and the marketing structure, the company opted for provisional assessment under Rule 7 of the Central Excise Rules. 

During finalisation of the provisional assessments, the company submitted detailed sales data and Chartered Accountant certificates certifying the discounts actually passed on to customers. However, the Department rejected the abatements on the ground that Titan failed to establish transaction-wise correlation between each factory clearance and corresponding retail sale invoice. 

Before the Tribunal, Titan argued that in a business involving lakhs of sales transactions and stock transfers across multiple locations, one-to-one matching of each clearance with a sale invoice was practically impossible. The company contended that the Department’s approach was contrary to commercial realities and settled legal principles. 

The Tribunal accepted this contention and held that the Department’s insistence on strict transaction-wise matching was legally unsustainable. It observed that the law “does not expect the impossible” and reasonable methods of determination must be accepted where strict compliance is impracticable due to the nature of trade. 

Relying on the Supreme Court judgment in Union of India v. Bombay Tyres International Ltd., the Tribunal reiterated that trade discounts actually passed on to buyers are admissible deductions while determining assessable value. It noted that there was no dispute regarding the fact that discounts had actually been offered to customers. 

The Bench further held that Chartered Accountant certificates issued after verification of statutory records constitute credible evidence and cannot be discarded merely because they are not transaction-specific. The Tribunal noted that the Department neither disproved the certificates nor conducted any investigation to establish that the underlying data was incorrect or fabricated. 

Importantly, the Tribunal criticised the Department for denying the entire abatement without proposing any alternative valuation methodology. It observed that in taxation matters, mathematical precision is not always possible and reasonable approximation based on available material is permissible. 

The Bench also referred to the Supreme Court ruling in CIT v. B.C. Srinivasa Setty and held that where the computation machinery becomes unworkable, the levy itself cannot be sustained. Applying that principle, the Tribunal held that when the Department itself acknowledged the impracticability of verifying lakhs of transactions but failed to adopt any reasonable mechanism for valuation, denial of the entire abatement became arbitrary and legally untenable. 

Holding that the impugned order suffered from “legal infirmity as well as lack of evidentiary support,” the Tribunal set aside the Order-in-Appeal and allowed Titan’s appeals with consequential relief.

Case Details

Case Title:  M/s. Titan Company Ltd. Versus Commissioner of GST and Central Excise 

Citation: JURISHOUR-1129-HC-2026(Ker) 

Case No.: Excise Appeal Nos. 42094 and 42097 of 2015

Date:  06.05.2026

Counsel For  Appellant: M. Kannan, Advocate

Counsel For Respondent: G. Krupa, Authorized Representative

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