1987 (9) TMI 194 - AT - Central Excise

Summary

Issues Involved: Determination of assessable value of goods u/s Section 4 of the Central Excises and Salt Act, 1944 based on discount given to buyer and additional considerations provided by buyer.

Summary:
The appellants, manufacturers of Welding Electrodes, sold their production to J.B. Advani (Mysore) (P) Ltd. with a 27.5% discount, leading to a dispute on whether this discount should be disallowed for assessing the value of goods u/s Section 4 of the Act. The department initially approved the discount but later sought to disallow it based on an agreement between the appellants and J.B.A.Co. The Assistant Collector disallowed the discount entirely, which was overturned by the Collector (Appeals). The department appealed this decision, arguing that the discount should be disallowed due to the relationship between the parties.

Upon review, it was found that the relationship between the appellants and J.B.A.Co. was not that of principal and agent, as claimed by the department. Various features of the agreement between the parties were analyzed, such as maintenance of showrooms, technical services, and sales promotions, with the conclusion that J.B.A.Co. operated as an independent buyer and seller, not as an agent of the appellants. The agreement did not establish a commission agent relationship, and the property in goods passed to J.B.A.Co. upon payment.

While the additional considerations provided by J.B.A.Co. for sales promotion were acknowledged, the Assistant Collector erred in disallowing the entire discount. The Tribunal referred to Rule 5 of the Central Excise (Valuation) Rules, 1975, which allows for the inclusion of additional considerations in the assessable value of goods. The legal precedent regarding the inclusion of costs for advertisement and publicity in the assessable value was cited from a Supreme Court judgment.

In conclusion, the impugned order of the Collector (Appeals) was set aside, and the appeal was allowed for the Assistant Collector to determine the money value of additional considerations, add it to the assessable value of goods, and revise the demand for short levy accordingly. No other points were raised during the proceedings.