M/S APOLLO TYRES LTD. Vs. CCE, PUNE

JUDGEMENT

(1.) THIS appeal against Order -in -Original No.7/2001 dated 31.1.2001 passed by the Commissioner (Adjudication) of Central Excise, Mumbai is directed against the demand of interest under section 11AB of the Central Excise Act and imposition of penalty under section 11AC of the Act.

(2.) THE appellant is a company registered under the Companies Act, 1956, having its registered office at Kochi and Head Office at Haryana. In one of its factories situated at Pune it is, inter alia, engaged in the manufacture of Tubes and Flaps falling under Chapter 40 of the First Schedule to the Central Excise Tariff Act, 1985. The appellant filed declaration effective from 1st June 1997 under Rule 173C of the Central Excise Rules, 1944 (hereinafter referred to as the Rules) declaring two sets of assessable value in respect of the above mentioned Tubes and Flaps. One set of assessable value was for dealers dealing exclusively in Apollo brand tyres and flaps operating under Apollo Tyres World Scheme (hereinafter referred to as ATW Scheme) and second set of assessable value was for other dealers who sell tubes and flaps not only of Apollo Tyres but also of other manufactures and are thus not covered under the ATW Scheme. In the price declarations appellant claimed ATW discount at the rate of 3% or 5% of the merchandise value offered to the dealers as per the ATW Scheme, Turnover Discount at the rate of 1.5% and Equalised Government Levies at the rate of 0.5%. ATW discount was claimed as deduction only in the first set of declaration. Pursuant to an investigation by the officers of Anti Evasion Directorate, a show cause notice dated 23.11.98 was issued to the appellant for the period June 1997 to June 1998 to show cause why deduction of the discount from the sale price should not be held as not permissible. The notice also called upon the appellant to show cause why penalty under section 11AC of the Act read with Rule 9(2) of the Rules should not be imposed and why interest should not be charged under section 11AB.

(3.) DETAILED reply was given by the appellant against the allegations made in the show cause notice. There is also a report from the Deputy Director of Central Excise, Anti Evasion on the basis of further enquiry. Statements were recorded from different persons connected with the transaction and personal hearing was also given to the appellant by the adjudicating authority. In the light of these materials, the adjudicating authority did not agree with the grounds made out in the show cause notice regarding eligibility of the appellant to claim the deduction of ATW discount from the assessable value. Adjudicating authority came to the conclusion that it was an established practice in the tyre trade to give a particular discount to buyers us whose purchases exceed certain minimum level and that the fact of grant of discount is known all along to the buyers concerned. It was also held that there is no reason to deny to deduction due to variation in nomenclature since a trade discount known by any name should be allowed provided it is passed on to the buyers and satisfies the other conditions specified in Section 4(d)(2). On the allegation that the discount the discount was not passed on in the invoice when the goods were sold from the Sales Offices/Regional Distribution Centres to the dealers, it was observed that if that discount had actually been passed on to the dealers through a credit note it would be sufficient to satisfy the statutory requirement. Ultimately the adjudicating authority came to the conclusion that out of the total amount of Rs.1,35,00,644 which would be ATW discount on tubes and flaps sold during June 97 to June 98, only an amount of Rs.4,03,338 was not passed on to the dealers. Duty demand on the above discount, namely, discount not passed on to the dealers was therefore confirmed. The duty amount worked out to Rs.1,02,455.