By TIOL News Service

MUMBAI, MAY 22, 2014: THE appellants were clearing Motor Vehicles to their dealers at a fixed rate and allowing quantity discount. The actual quantum of discount was known only after completion of the calendar year.

As per the appellant's request, the assessment was ordered to be provisional on the basis of quantity discount scheme made known by the appellants and existing after 01.09.2000 onwards.

At the end of the calendar years, the appellants had shown the quantity discount of Rs.30,000/-, Rs.60,000/- and Rs.90,000/- for levels of performance of 80%, 100% and 120% respectively for their dealers calculated on the basis of the actual number of vehicles sold by their dealers over last year performance in respect of the clearance made during September, 2000 to December, 2000 and quantity discount of Rs.20,000/-, Rs.30,000/- and Rs.40,000/- for levels of performance of 100%, 110% and 120% respectively for Mercedes-Benz car 203 C Class; Rs.20,000/- Rs.50,000/- Rs.90,000/- and Rs.1,10,000/- for levels of performance of 90%, 100%, 110% and 120% respectively for Mercedes-Benz car WZ 10 E class and Rs.1,10,000/- for level of performance of 100% for Mercedes-Benz car V220 S Class for their dealers calculated on the basis of the actual number of vehicle sold by their dealers over last year performance, in respect of the clearances made during 01.01.2001 to 31.12.2001.

While finalizing the provisional assessment the adjudicating authority observed that duty incidence was passed on to the customers and subsequently the appellants issued credit notes. He further observed that incidence of duty which was refunded to the dealer through credit notes had not been passed on to the customer (final purchaser) and that the duty burden was passed on to the buyer but refund claim was filed by the manufacturer i.e. the appellants.

The Deputy Commissioner sanctioned the refund of Rs.40,59,180/- but credited it to the Consumer Welfare Fund on the ground that the refund was hit by unjust enrichment.

Since this order was upheld by the Commissioner (Appeals) by inter alia citing the decision in Sangam Processors (Bhilwara) Ltd. [2002-TIOL-59-CESTAT-DEL-SB], wherein it was held that once the duty burden was passed on to the customer at the time of clearance of goods, issuance of credit notes at a subsequent stage would not alter the position, the car manufacturer is before the CESTAT.

The appellant submitted that the issue is covered by the ruling of Madras High Court in the case of Addison & Co. vs. CCE, Madras 2003-TIOL-396-HC-MAD-CX. It is further pointed out that this ruling has been followed by the Andhra Pradesh High Court in A.P. Paper Mills Ltd. - 2014-TIOL-448-HC-AP-CX.

The Revenue representative submitted that in view of the fact that the Supreme Court after condoning delay granted leave on the Petition for Special Leave to Appeal (Civil) No. 12391 of 2002 filed by Commissioner of Central Excise, Madras against judgment and order dated 23-11-2002 of the High Court of Madras in Addison & Co., the present appeal is to be dismissed as the ruling of Madras High Court is in jeopardy.

The CESTAT observed -

"7. … I find that the ruling of Hon'ble Madras High Court in the case of Addison & Co. is good law. No stay have been given by the Hon'ble Apex Court. Further the Hon'ble Andhra Pradesh High Court in aforementioned order dated 19.02.2014 have followed Addison & Co. I also find that the facts of present appeal are common with the facts of the Addison & Co (supra). Further the facts in Sangam Processors case are different, as the manufacturer in that case had applied for refund without paying back the duty collected from the buyer/dealer. Thus, the appeal is allowed with direction to the adjudicating authority to disburse the determined refund within six weeks along with interest as per Rules."

(See 2014-TIOL-825-CESTAT-MUM)