Per P. Karthikeyan : This is an appeal filed by the Revenue. Respondent M/s. Texmo Industries, Coimbatore, manufactures and clears different varieties of pumps. The respondent stock transfers the manufactured pumps to its branches paying duty on the list price less 5% discount. However, the dealers were not given discount in the invoices but credit notes were issued for an equivalent amount. The dealers are periodically credited with the 5% of the list price in the commercial invoices monthly or at the end of the year. In the credit notes, the respondents described the discounts as 'after sales service allowance'. When the pumps manufactured were exempt from payment of duty upto 1.3.2002 also the respondents used to describe the 5% amount actually credited to the dealers as after sales service allowance.

2. Notices were issued to the respondent to recover duty on the above 5% amount described as 'after sales service allowance' treating it as additional consideration received by the assessee during the period 1.3.2002 to 31.01.2004. The original authority dropped the proceedings, finding that the respondents actually passed on the 5% discount to the dealers at the end of every year/month. In the impugned order the Commissioner (Appeals) did not accept the department's plea that by issuing credit note for 5% of the list price, the dealers were actually compensated for selling and distribution expenses in the guise of annual discount with intention to evade payment of duty. He also did not accept the argument that since the amount transferred to dealers through credit note had been recorded as selling and distribution expenses in their Profit and Loss Account it was really towards after sales services incurred by dealers. The appeal before him had proceeded on an assumption that the dealers rendered after sales service on behalf of the respondents without any evidence to show that the dealer had actually incurred any such expenditure. The revenue had no case that the respondents had retained the discount without passing on the same to the dealers. The circular issued by the respondent among the dealers clearly stated that credit note for 5% annual discount given on list price would be issued to dealers along with invoice on daily basis for the day's transaction and the amount would be credited on 31st March. The circular had directed the branches that the credit note should be sent to dealers along with the invoices daily. This practice was changed on 1.1.2003 by crediting the discount of 5% to the account of the dealers at the end of the month itself. The Commissioner (Appeals) was satisfied that the respondents did not collect after sales service charge from customers or passed on to the dealers. There was no evidence to show that the dealers had actually incurred any expenses towards any after sales service nor the assessee had an enforceable legal right against the dealers to force them incur on their behalf such expenses to be later on met from the so called discount. It was settled law that discount by what ever name it was called was permissible deduction whether it was given in the invoices or by way of credit notes provided the same was actually passed on. The impugned order was passed on the above findings.

3. In the appeal before us, revenue has found the impugned practice unusual to grant discount. The assessee had not established that they were passing on to the dealers the 5% amount collected through commercial invoices. What was passed on in the instant case was after sales service allowance camouflaged as year end discount. The preponderant probability established the case against the respondent.

4. The Ld. SDR reiterated the grounds of appeal taken by the revenue.

5. The Ld. Counsel for the respondents has relied on the decision of the Tribunal in Mahavir Spinning Mills Ltd. Vs. CCE, reported in 2007 (78) RLT 123 (CESTAT-Del.)=2007 (207) ELT 94 (Tri.-Del.) and Maruti Udyog Ltd. Vs. CCE Delhi reported in 2004 (63