1986 (5) TMI 132 - Commissioner - Central Excise

Summary

Issues:
- Appeal against Order-in-Original confirming show cause cum demand notices.
- Dispute regarding classification of commission to dealers as trade discount.
- Request for stay due to company's financial losses.
- Allegation of illegal show cause notice.
- Claim for deduction of commission approved in price-list.
- Classification of distributors as related persons.
- Disallowance of commission deduction by Assistant Collector.
- Interpretation of after-sale services in relation to assessable value.
- Applicability of Supreme Court judgments on related persons and commission deduction.

Analysis:
The appeal was filed by M/s. Girnar Scooters Ltd., now under the management of M/s. Gujarat Narmada Auto Ltd., against the Order-in-Original confirming two show cause cum demand notices issued by the Assistant Collector, Central Excise, Dn. II, Ahmedabad. The dispute revolved around the classification of commission paid to dealers as not being a trade discount. The Assistant Collector adjudged that the appellants were not providing discounts to direct consumers and instead paid a commission to dealers for services rendered, which he considered not eligible for deduction as trade discount.

The appellants, aggrieved by the order, requested a stay on a priority basis due to the company being a sick concern under new management. The financial losses suffered by the company were substantial, amounting to Rs. 343.39 lakhs until 1984-85. Despite the losses, the condition of pre-deposit was dispensed with, allowing the appellants' representatives to argue on merit.

The appellants raised several contentions in their appeal. Firstly, they argued that the show cause notice did not mention 'related persons,' contrary to the Order-in-Original, which termed distributors as related persons. They cited precedents to support their claim of an illegal show cause notice. Secondly, they claimed that the deduction of commission was approved in the price-list and could not be revoked by the same officer who approved it, citing relevant case law to support their argument.

Regarding the classification of distributors as related persons, the appellants relied on Supreme Court judgments to assert that not all distributors are related persons, only those defined as relatives under the Companies Act, 1956. They contested the disallowance of commission deduction by the Assistant Collector, emphasizing that the after-sale services provided by dealers did not make them related persons, as per legal precedents cited.

Ultimately, the Commissioner set aside the Order of the lower authority and allowed the appeal, providing consequential relief, if any. The decision was based on the findings that the Order-in-Original did not align with the issues raised in the show cause notice, particularly concerning the classification of distributors as related persons and the treatment of commission in the assessable value. The judgment was guided by the interpretation of relevant legal principles established by the Supreme Court in similar cases.