1981 (9) TMI 286 - CGOVT - Central Excise

Summary

Issues:
Deduction of discount claimed by M/s. Zandu Pharmaceuticals Works Ltd. under Tariff Item 68 of Central Excise Tariff.

Analysis:
The case involved M/s. Zandu Pharmaceuticals Works Ltd., Bombay, claiming a deduction of a 10% discount in the assessable value declared by them for drugs falling under Tariff Item 68 of Central Excise Tariff. The Asstt. Collector disallowed the 10% discount claimed by the party. The Appellate Collector partially allowed the appeal, granting a deduction of a 5% discount uniformly given at the time of goods' removal. The Government issued a show cause notice to the party under Section 36(2) of the Central Excises and Salt Act, 1944, challenging the Appellate Collector's order. The party also filed a revision application against the Appellate Collector's order, leading to the review proceedings addressed in the judgment.

The party explained that 80% of their goods were sold to wholesale dealers outside Bombay with a 10% discount uniformly granted. For the remaining 20% of sales in Bombay, they provided a 5% discount on invoices and additional varying discounts based on annual turnover through credit notes. The Government verified the party's sales pattern and confirmed the correctness of the reported facts. The deferred discounts given by the party to dealers in Bombay were based on contractual agreements and the total value of goods purchased annually, qualifying as quantity discounts eligible for deduction. However, the Government rejected the party's argument for a 10% discount on all sales, stating that only discounts actually allowed could be claimed for deduction without adopting an averaging system.

Consequently, the Government disposed of the review proceedings and revision application by ruling that the party should receive a deduction for the discounts actually granted in their sales. The exact amount of discount, varying by dealer based on sales, was to be determined by the Asstt. Collector after verifying the party's records. The discount allowed should not exceed 10%, which was the maximum discount claimed by the party in their submissions.