1997 (2) TMI 120 - SUPREME COURT

Whether the assessable value of the goods manufactured by assessee during the period 1983 to 1986 had not been correctly determined inasmuch as the appellant had claimed inadmissible deductions from the price realised from its dealers on account of, amongst others, "normal trade discount" although a substantial part thereof represented advertisement expenses and expenses on after sales service which were includible in the assessable value?

Held that:- As to the after sales service that the dealer was required under the agreement to provide, it did of course enhance in the eyes of intending purchasers the value of the appellant's product, but such enhancement of value enured not only for the benefit of the appellant; it also enured for the benefit of the dealer for, by reason thereof, the dealer got to sell more and earn a larger profit. The guarantee attached to the appellant's products specified that they could be repaired during the guarantee period by the appellant's dealers anywhere in the country. Thus, though one dealer might have to repair goods sold by another dealer and incur costs in that regard, he also had the benefit of having the goods he sold reparable throughout the country. The provision as to after sales service, therefore, benefited not only the appellant; it was a provision of mutual benefit to the appellant and the dealer.

We think that in adjudicating matters such as this, the Excise authorities would do well to keep in mind legitimate business considerations.We cannot help but observe that the reduction of the trade discount by two percentage points would not have occurred to the adjudicating authorities, being an unlikely estimate, but for the fact that the 2% here realised ₹ 50 lacs and odd. The appeal is allowed.