1981 (12) TMI 162 - CGOVT - Central Excise

Summary

Issues:
1. Whether the graded discounts were allowed uniformly to all independent buyers.
2. Whether the maximum discount of 20% was rightfully restricted to one specific buyer.
3. Whether the order-in-appeal by the Appellate Collector was legal and proper.
4. Whether the party provided sufficient evidence to refute the allegations in the show cause notice.

Analysis:
1. The case involved M/s. Viniba Products, manufacturers of cosmetics, who offered graded discounts ranging from 5% to 20% to various buyers. The local Departmental Officers discovered that the maximum 20% discount was only granted to a single buyer, M/s. S.T.S.R. & Co., owned by the husband of the assessee firm's proprietoress. Despite other buyers purchasing quantities eligible for the maximum discount, they did not receive it. The Asstt. Collector restricted the discount abatement to 10-12% for all independent buyers. The Appellate Collector overturned this decision, citing lack of evidence of non-uniform discount distribution.

2. The Government of India, upon review, found grounds to question the Appellate Collector's decision and issued a show cause notice under Section 36(2) of the Central Excise and Salt Act, 1944, to the party. The party denied any special relationship with M/s. S.T.S.R. & Co., claiming arms-length transactions. However, they failed to provide substantial evidence or explanations to counter the specific allegations. Contrary to the party's claims, statements from other buyers indicated preferential treatment towards M/s. S.T.S.R. & Co., suggesting non-uniform discount allocation.

3. During the hearing, the party argued that only M/s. S.T.S.R. & Co. had the capacity to purchase quantities exceeding 200 dozens, justifying the exclusive 20% discount. However, evidence from other buyers contradicted this assertion, revealing instances where discounts were denied based on shipment sizes below 200 dozens. The Government concluded that the party did show favoritism towards M/s. S.T.S.R. & Co., breaching uniform discount allocation principles. Consequently, the Government set aside the Appellate Collector's decision and reinstated the original order restricting the discount abatement to 10-12% for all buyers.