1979 (7) TMI 103 - HC - Central Excise

Valuation - Trade discount admissibility even on goods used for captive consumption - Concession

Summary

Issues:
Interpretation of Section 4 of the Central Excises and Salt Act, 1944 regarding the deduction of trade discount for excise duty valuation.

Detailed Analysis:

1. Background and Initial Demands:
The Petitioner, a Limited Company, manufactures various products including fuming sulphuric acid known as 'Oleum'. The company faced demands for payment of differential duties for not deducting a trade discount of 10% on Oleum 20% used for manufacturing another product, Chlorosulphonic acid. The demands were based on the contention that the discount should not be considered for excise duty valuation if the goods were not sold to outsiders.

2. Appeals and Revision Applications:
The Petitioner challenged the demands through appeals and revision applications. The Deputy Collector and the Union Government upheld the demands, stating that the trade discount could not be deducted for goods used internally. The Union Government's decision was based on the quantity discount being conditional on future transactions reaching a fixed figure.

3. Legal Arguments:
The Petitioner argued that the concept of quantity discount was accepted by the government and that excise duty should be levied on the value determined under Section 4 of the Act, which allows for deduction of trade discount. The Union of India contended that the trade discount could only be deducted if it was actually given in a sale to outsiders.

4. Court's Interpretation of Section 4:
The Court analyzed Section 4 of the Act, emphasizing that the value for excise duty purposes should be determined after deducting the trade discount. The Court noted that the wholesale cash price, minus the trade discount, represents the value of goods used internally by the manufacturer, and there should be no distinction in valuation between goods sold and those used internally.

5. Decision and Rationale:
The Court quashed the Union Government's revisional order and the demands, stating that the Department's view on not allowing the trade discount for internally used goods was based on a misconstruction of the provision in the Explanation to Section 4. The Court held that the Petitioner was entitled to deduct the trade discount even for goods used internally, as the valuation for excise duty should consider the normal price at which goods are sold, irrespective of their end use.

6. Conclusion:
The Court allowed the Petition with costs, emphasizing that the trade discount deduction should be permitted for excise duty valuation under Section 4 of the Act, regardless of whether the goods were sold or used internally by the manufacturer.