2003 (3) TMI 103 - SC - Central Excise

Whether the differential discount between stockists discount and sub-stockists discount passed on to the stockists by the assessee is deductible in assessing the excisable value of the goods sold to the sub-stockists? Held that - From the contentions raised before the Tribunal it appears to have been urged for the assessees that the differential between the higher discount to their stockists and the lower discount to the sub-stockists was passed on to the stockists as commission. If that be the plea even otherwise the differential discount cannot be accepted for the purpose of sub-clause (ii) as a permissible deduction. See Seshasayee Paper and Boards Limited v. Collector of Central Excise 1990 (2) TMI 52 - SUPREME COURT OF INDIA . For the aforementioned reason the differential discount has rightly been disallowed as deduction by the Tribunal in computing the excisable value of the tractors sold by the assessees to the sub-stockists. The appeals fail

Summary

Issues:
1. Deductibility of the differential discount in assessing the excisable value of goods sold to sub-stockists.

Analysis:
The case involved appeals by two assessees against the order of the Customs, Excise and Gold (Control) Appellate Tribunal regarding the deductibility of the differential discount between stockists and sub-stockists in assessing the excisable value of goods. The assessees manufactured tractors and sold them to stockists at a higher discount compared to sub-stockists. The differential discount of 2.5% passed on to stockists was the subject of dispute. The Assistant Collector initiated proceedings disallowing the deduction, leading to appeals and counter-appeals. The Tribunal upheld the disallowance, prompting the assessees to appeal to the Supreme Court.

The valuation of goods for levying excise duty is governed by Section 4 of the Central Excise Act, which deems the normal price at which goods are sold to a buyer in wholesale trade as the excisable value. In this case, the assessees sold tractors to stockists at a 27.5% discount and to sub-stockists at a 25% discount. The assessees argued that the differential discount should be deducted as part of the trade discount. However, the Court noted that the differential discount passed on to stockists cannot be considered a discount to sub-stockists and should not be treated as such.

The Court rejected the argument that sub-stockists were nominated by stockists, emphasizing that they are distinct wholesale purchasers. The differential discount was not accepted as a permissible deduction under the trade discount clause. The Court also dismissed the contention that the differential discount was a commission to stockists. Citing precedent, the Court held that the Tribunal rightly disallowed the deduction of the differential discount in computing the excisable value of tractors sold to sub-stockists. Consequently, the appeals were dismissed with costs.