1993 (6) TMI 76 - HC - Central Excise

Summary

Issues Involved:
1. Deduction on account of bonus to dealers.
2. Deduction on account of freight and octroi.
3. Deduction on account of transit insurance.
4. Deduction on account of secondary/outer packing.

Detailed Analysis:

1. Deduction on Account of Bonus to Dealers:
The company sought deduction for bonus to dealers, which was part of their established practice since 1970. The Assistant Collector denied this deduction, arguing that the exact amount of bonus was not known at the time of removal of goods. However, the court found this reasoning flawed, citing the Supreme Court's decision that trade discounts should be allowed if they are known at or prior to the removal of goods, even if the exact amount is determined later. The court held that the bonus to dealers qualifies as a trade discount and should be deducted from the sale price. The Assistant Collector's refusal to accept the composite scheme covering both manufactured and traded sets was also deemed erroneous. The matter was remitted back for re-examination, requiring the company to establish the bonus scheme's existence and its application to manufactured articles.

2. Deduction on Account of Freight and Octroi:
The company claimed deductions for freight and octroi, which the Assistant Collector denied because the accounts were combined and not separately presented. The court found this denial unjustified, emphasizing that transportation costs, including insurance, are deductible as per the Supreme Court's ruling in the Bombay Tyre International Ltd. case. The court directed the Assistant Collector to reconsider the claim, ensuring that the combined receipts for freight and octroi are appropriately examined.

3. Deduction on Account of Transit Insurance:
The company's claim for transit insurance deduction was also denied by the Assistant Collector due to the lack of separate worksheets distinguishing transit insurance from other types of insurance. The court criticized this approach, stating that the Assistant Collector should have used the best judgment principle to determine the deductible amount rather than rejecting the entire claim. The matter was remanded for a fresh assessment, with instructions to the Assistant Collector to reconsider the claim and pass an appropriate order.

4. Deduction on Account of Secondary/Outer Packing:
The company argued that secondary/outer packing for safe transport should be deductible. The Assistant Collector denied this claim, and the court upheld this decision. The Supreme Court's precedent allows deductions for special packing made at the buyer's request or due to the goods' peculiar nature. Since the radios were normally packed in multiple layers and never sold without such packing, the court agreed that these costs could not be deducted.

Conclusion:
The court set aside the Assistant Collector's order dated March 30, 1984, except for the finding on secondary/outer packing, which was upheld. The Assistant Collector was instructed to re-examine the claims for deductions on bonus to dealers, freight and octroi, and transit insurance, allowing the company to present additional material if necessary. The matter was to be disposed of afresh as expeditiously as possible. The rule was made absolute with no order as to costs.