2000 (8) TMI 85 - SC - Central Excise

Admissibility of discount damages Held that - When the original Authority took up the matter for consideration after remand, the respondent filed certain affidavits of its buyers who in their own words have stated that some trade practice was existing whereby the respondent company was reimbursing the loss suffered by the buyers due to the damages caused to the goods. Learned Attorney General has argued that these affidavits cannot be relied upon. He also urged that the appellant has produced a copy of the agreement between the respondent and its buyers which, according to him, belied the existence of the trade practice as claimed by the respondent. Even though this document was produced only at the first appellate stage, we find it has direct bearing on the question in issue in view of the contents of clause 14 of the said agreement. Based on this clause, it is contended for the appellant that no trade practice in regard to damage deduction is in existence. On behalf of the respondent, it is contended that they are not relying on the agreement to establish the trade practice; still, to rebut the argument of the appellant based on clause 14 of the agreement the respondent places reliance on clause 15 of the said agreement which, according to the respondent, creates an obligation on the respondent to compensate the buyers for the loss suffered by them due to damage to the goods. We do not want to express any opinion in regard to these arguments addressed by the parties. The authorities below have not gone into the impact of the various clauses of the agreement on the claim of the respondent as to the existence of trade practice in the wholesale market. We feel this raises primarily a question of fact and is a matter which goes to the root of the claim, therefore, it should be decided in the first instance by the original Authority. Therefore, we consider it appropriate to remand the matter back to the original Authority directing it to decide the matter afresh after giving the parties concerned an opportunity of producing such evidence as they desire to produce and after hearing the parties. We make it clear that we have not expressed any opinion with reference to the various arguments addressed before us and referred to in this order of ours except to the extent of the finding delivered by us in regard to the finality of the decision rendered by the Tribunal in the earlier round of proceedings and in regard to the correctness of the reliance placed by the Tribunal on the two orders of its own while allowing the appeal of the respondent, which according to us, is unsustainable.

Issues Involved:
1. Deductibility of "damage discount" from the assessable value under Section 4(4)(d)(ii) of the Central Excise Act, 1944.
2. Relevance of previous Tribunal decisions in Assam Valley Plywood Pvt. Ltd. and Tungbhadra Industries Ltd. cases.
3. Finality of the Tribunal's earlier decision.
4. Admissibility and relevance of affidavits and agreements between the respondent and its buyers.

Issue-wise Detailed Analysis:

1. Deductibility of "damage discount" from the assessable value under Section 4(4)(d)(ii) of the Central Excise Act, 1944:
The respondent claimed deductions for "damage discount" from the assessable value of goods. The Assistant Collector disallowed some deductions, which were later allowed by the Commissioner of Appeals, except for "damage discount." The Tribunal allowed the appeal, directing the original Authority to reconsider the claim for deduction. The appellant argued that such deductions are post-manufacturing expenses and not deductible under Section 4(4)(d)(ii) of the Act. The respondent contended that these deductions are permissible as they are part of the trade discounts allowed in accordance with normal practice of wholesale trade, supported by affidavits and Chartered Accountants' certificates.

2. Relevance of previous Tribunal decisions in Assam Valley Plywood Pvt. Ltd. and Tungbhadra Industries Ltd. cases:
The Tribunal relied on its earlier decisions in Assam Valley Plywood Pvt. Ltd. and Tungbhadra Industries Ltd. to allow the "damage discount." However, the Supreme Court found that these decisions did not address the specific legal and factual questions relevant to the current case. The Tribunal's reliance on these cases was deemed incorrect as they did not establish any legal principles applicable to the present issue.

3. Finality of the Tribunal's earlier decision:
The respondent argued that the issue of "damage discount" was finally adjudicated by the Tribunal in the first round of litigation and should not be reopened. The Supreme Court rejected this argument, stating that the Tribunal's earlier decision did not attain finality as the matter was remanded to the original Authority. The Court cited the case of Jasraj Inder Singh v. Hemraj Multanchand, emphasizing that a higher court is not bound by the findings of a lower court in a remand order.

4. Admissibility and relevance of affidavits and agreements between the respondent and its buyers:
The respondent submitted affidavits from buyers to establish the existence of a trade practice for "damage discount." The appellant argued that these affidavits contradicted the agreement between the respondent and its buyers, specifically Clause 14, which stated that buyers would bear the cost of damages in transit. The Supreme Court noted that the original Authority did not consider the impact of the agreement's clauses on the claim of trade practice. The matter was remanded to the original Authority for fresh consideration, allowing both parties to present additional evidence.

Conclusion:
The Supreme Court quashed the Tribunal's order and remanded the matter to the original Authority for fresh disposal. The Court directed the original Authority to decide the matter afresh, considering the evidence and arguments presented by both parties. The appeals were disposed of accordingly.

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