1989 (9) TMI 280 - AT - Central Excise

Summary

Issues:
Whether CMO is a related person or favoured buyer; Whether the discount allowed by the appellants to CMO is permissible, and if so, to what extent.

Analysis:
The case involves a revision filed by the appellants against an Order-in-Appeal transferred to the Tribunal as an appeal under Section 35P(2) of the Act. The appellants, a manufacturer of Prepared or Preserved Foods, sold goods to Canteen Stores Department (CSD) and Weikfield Central Marketing Organisation (CMO) with different discounts. The appellants sought a refund based on higher discounts allowed to CMO. The Assistant Collector rejected the refund claim, citing non-protest of assessable value determination and non-payment of duty under protest. The first Appellate Authority rejected the appeal, stating that the value of identical goods was determinable. The main contention was whether CMO was a related person or favoured buyer, impacting the permissibility of the discount.

Shri N.D. Khosla, representing the appellants, argued that CMO, a partnership firm, was not a related person under Section 4(4)(c) of the Act, supported by precedents. He contended that the transactions were at arm's length, and the discount was justified. On the other hand, Shri Krishnamurthy, for the respondent, argued that the discount was not permissible due to close relations between CMO partners and appellants.

The Tribunal analyzed the case, determining that CMO was neither a related person nor a favoured buyer. It was established that CMO's partnership structure prevented it from being considered a relative of the appellants. As per legal precedents and the Voltas case, a favoured buyer must have proof of specifically low prices, which was not the case here. The Tribunal concluded that the discount was permissible under the old Section 4, considering the maximum rate allowable for trade discounts. The excess discount allowed to CMO was deemed justified, as CMO was obligated to pass it to wholesale dealers. Consequently, the Tribunal set aside the lower authorities' orders and allowed the appeal, granting consequential relief to the appellants.