MARUTI UDYOG LIMITED Vs. CCE

JUDGEMENT

(1.) M/s. Maruti Udyog Limited is a manufacturer of motor vehicles which are liable to central excise duty on ad -valorem basis. From 1998 to March 2001 they offered a Special Rebate to dealers in respect of three varieties of motor vehicles. The rate of the rebate was Rs. 1000 per Maruti 800 cars and Omni Vans and Rs. 2000 per Esteem cars. The central excise duty was paid on these vehicles on the basis of assessable values which excluded the special rebate from the price of the vehicles. Under the orders impugned in these appeals, the Commissioner of Central Excise has held that it was not permissible to reduce the rebate from the price of the automobiles while fixing the assessable value of the automobiles. Consequently, duty short levied on account of such reduction has been demanded in addition to imposing penalties equal to the duty short levied and interest on the short levy.

(2.) The finding regarding ineligibility of the special rebates for reduction has been reached on the ground that the special rebate scheme is not in accordance with the normal practice of trade discount inasmuch as the rebate was only deposited into a Dealer Reserve Fund not provided for in the dealership agreement. The Commissioner's finding as to why the special rebate cannot be treated as a discount are as under:

(3.) The appellant's submission on the above findings are that the special rebate had in fact been allowed to the dealers of the automobile and that the amounts on this count were deposited in the security deposit of individual dealers only so as to ensure that, over a period of time, dealers have enough security deposit with the Maruti Udyog Limited so as to cover the value of one month's purchase of automobile. It has been stated that the condition regarding deposit of amounts in the dealers reserve fund was stipulated to ensure some protection to Maruti against default in payment by dealers. The appellants have explained that such a condition in no way altered the position that the rebate/discount was actually given to the dealers. The rebate was always deposited into the separate security deposit account of the dealers and Maruti paid an interest @ 10% on the security deposit. It has been further stated that in the books of accounts of M/s. Maruti Udyog the rebate amount remained as a liability and the books of accounts of the dealers showed the special rebate amounts as income. The learned Counsel for the appellant pointed out that the rebate was actually paid and its receipt is also clear from the fact that the dealers included the special rebate amounts as their income and paid income tax accordingly. Further, part of the rebate amount (Rs. 330 to Rs. 385 per vehicle) was withdrawn immediately from the reserve fund by the dealers for the purpose of payment of income tax. In these circumstances, it is the contention of the learned Counsel for the appellant that the fact of the deposit of the rebate into the dealer reserve fund was of no relevance for determining whether it was a discount because manner of payment of the rebate and its utilization are entirely for the party's concerned to agree upon. The learned Counsel also pointed out that the Commissioner's observation regarding restriction on the use of the amount by the dealers is not material to the dispute inasmuch as the rebate undoubtedly belonged to the dealers and it was never returned to M/s. Maruti Udyog Limited.