COMMISSIONER OF C. EX. Vs. NILKAMAL PLASTICS LTD.

JUDGEMENT

(1.) The Revenue by this appeal challenges the Order -in -Appeal No. 445/2003/Pondicherry, dated 13 -8 -2003 passed by the Commissioner of Central Excise (Appeals), Chennai by which the Commissioner has allowed the appeal filed by the assessee -respondents against the order in original passed by the Assistant Commissioner/ Pondicherry.

(2.) Brief facts of the case are that M/s. Nilkamal Plastics, Pondicherry, the respondents herein are engaged in the manufacture of Plastic moulded furniture falling under chapter sub -heading 9401.00, 9403.00 and Plastic crates falling under chapter sub -heading 3923.90 of the CETA, 1985. As a uniform industry practice the entire Plastic Chair Manufacturing industry had decided not to accept the rejected goods if any returned by their buyers. It was also decided to increase the discount allowed to the customers by 1% to 2% at the time of clearance of the goods irrespective of the level of rejection. The said discount was given as an additional discount and the assessee -respondents declared the same in the declaration filed under Rule 173C(3A) clearly indicating that the said additional trade discount is in lieu of accepting any rejection back from the customers. It was in these circumstances that show cause notice was issued by the Assistant Commissioner proposing to disallow the additional trade discount alleging that the said discount is to compensate the customer for the damages suffered after the goods were cleared to them and in terms of the judgments of the Hon'ble Apex Court in the case of CCE v. Vikram Detergent Ltd. reported in 2001 (127) E.L.T. 641 (S.C.) damage discount is not allowable and the show cause notice culminated in the order of adjudication passed by the Assistant Commissioner confirming a differential demand of duty of Rs. 2/376,963/ - and imposing penalty of Rs. 60,000/ - on the respondents apart from demanding interest under Section 11AA and Section 11AB of the Act. Aggrieved by the said order, the respondents moved the Commissioner (Appeals) who by the impugned order, set aside the order of the Assistant Commissioner. Hence this appeal by the Revenue.

(3.) Shri A. Jayachandran, learned JDR for the appellant -Revenue referred to the grounds of appeal and submitted that in the instant case the additional discount of 1 to 2% is given to the customers on condition that no claim towards damages be claimed by the customers irrespective of the extent of rejection. Therefore, the said discount is similar to the discount passed on towards damages. He has also invited my attention to the judgment of the Hon'ble Apex Court in the case of CCE v. Hindustan lever Ltd. reported in 2001 (130) E.L.T. 721 (S.C.) wherein it was held that discount on account of damages are not allowable. The said judgment has relied upon the earlier judgments of the Apex Court in the case of Assistant Commissioner v. MRF Ltd. reported in 1987 (27) E.L.T. 553, CCE v. Vikram Detergent reported in 2001 (127) E.L.T. 641 (S.C.) and Govt. of India v. MRF reported in 1995 (77) E.L.T. 433 (S.C.). The Commissioner (Appeals), in the present case has overlooked the decisions of the Hon'ble Supreme Court cited supra, argued the learned JDR. He, therefore, prayed for allowing the Revenue appeal.