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1 Sep 2015

Cash Discount is deductible from Transaction Value"

Recently in case of M/s. Purolator India Ltd. Versus Commissioner of Central Excise, Delhi – III 2015 (8) TMI 1014 honorable Apex Court held that cash discount has to be taken in account in arriving at “price” even under Section 4 of the Central Excise and Salt Act, 1944 as amended in 2000.

Honorable Apex Court observed that common thread running through Section 4, whether it is prior to 1973, after the amendment in 1973, or after the amendment of 2000, is that excisable goods have to have a determination of “price” only “at the time of removal”. This basic feature of Section 4 has never changed even after two amendments. Further, section 4 as amended introduces the concept of “transaction value” so that on each removal of excisable goods, the “transaction value” of such goods becomes determinable. The basis of “transaction value” is therefore the agreed contractual price.

Cash discount is something which is “known” at or prior to the clearance of the goods, being contained in the agreement of sale between the assessee and its buyers, and must therefore be deducted from the sale price in order to arrive at the value of excisable goods “at the time of removal”.