1981 (3) TMI 85 - CGOVT - Central Excise

Summary

Issues:
1. Whether the petitioners are entitled to deduct the trade discount given to their principal distributor for determining the assessable value.
2. Whether the transactions between the petitioners and their principal distributor were at arms length.
3. Whether the petitioners are eligible for refund claims based on the revised assessable value.

Analysis:
1. The petitioners argued that they were entitled to deduct the trade discount given to their principal distributor based on commercial practices and past dealings with other distributors. They provided evidence of discounts given to previous distributors and contended that the transactions with the current distributor were bona fide commercial transactions. The Government found merit in these contentions and referred to the Supreme Court's decision in Atic's case, which supported the deduction of trade discount to determine the assessable value. Consequently, the Government held that the petitioners were entitled to deduct the trade discount for assessing the value and directed that refund claims should be considered based on this decision.

2. The Government examined the nature of transactions between the petitioners and their principal distributor, Parekh Agencies. They noted that the discount given to Parekh Agencies was consistent with discounts given to previous distributors and that Parekh Agencies passed on a substantial part of the discount to their wholesale dealers. There was no evidence to suggest that Parekh Agencies were favored buyers receiving a specially low price. Citing the Supreme Court's observations in Atic's case regarding transactions at arms length, the Government concluded that the transactions between the petitioners and Parekh Agencies were in the usual course of business, justifying the deduction of the trade discount for assessing the value.

3. The petitioners' refund claims were based on the revised assessable value after deducting the trade discount given to Parekh Agencies. The Government's decision to allow the deduction of the trade discount impacted the eligibility of the petitioners for refund claims. As a result, the Government directed that the refund claims should be reconsidered in light of the order permitting the deduction of the trade discount. The petitioners were entitled to consequential relief based on this decision.

In conclusion, the Government held in favor of the petitioners, allowing them to deduct the trade discount given to their principal distributor for determining the assessable value. The transactions between the petitioners and their distributor were considered to be at arms length, and the petitioners were deemed eligible for refund claims based on the revised assessable value.