1995 (11) TMI 376 - AT - Central Excise

Summary

Issues:
1. Disallowance of additional trade discount and cost of secondary packing in the price list.
2. Jurisdiction of the Supdt. to issue a notice of demand without a show cause notice.

Issue 1: Disallowance of Additional Trade Discount and Cost of Secondary Packing:

The appellants, engaged in manufacturing paints and varnishes, filed a declaration in 1977 to manufacture products for M/s. Berger Paints India Ltd. The dispute arose regarding the deduction claimed for additional trade discount and cost of secondary packing in the price list. The Assistant Collector had allowed a 5% and 4.5% trade discount but disallowed the additional discount extended by the principal to its dealers based on volume of purchase. The Tribunal held that difficulties in calculating the discount cannot be a ground for disallowing the deduction. The Supreme Court's decision in a similar case supported the deduction of additional trade discount granted by the principal. The deduction for the cost of secondary packing was also allowed as it was not used in wholesale trade at the factory gate, making it eligible for deduction in determining the assessable value.

Issue 2: Jurisdiction of the Supdt. to Issue a Notice of Demand:

The Supdt. Central Excise quantified the assessable value and excise duty payable at the end of the year, leading to a demand for payment from the appellants. The appellants contended that the Supdt. had no jurisdiction to issue a notice of demand without a show cause notice. However, the respondent argued that it was an assessment under Rule 173(1) which did not require a show cause notice. The Tribunal did not resolve this controversy as they modified the impugned order by allowing deductions for additional trade discount and secondary packing. The Supdt.'s demand was set aside, and the Department was directed to recalculate the amount due and issue a fresh demand in accordance with the law.

In conclusion, the Tribunal allowed the appeals, holding that the appellants were entitled to deductions for additional trade discount and secondary packing. The Supdt.'s demand was set aside, and the Department was instructed to quantify the amount due based on the Tribunal's order. The decision clarified the eligibility criteria for deductions and emphasized the importance of providing relevant materials to support the claimed deductions.