1993 (3) TMI 239 - AT - Central Excise

Issues Involved:

1. Legality of the approval of price lists with quantity discounts.
2. Whether the quantity discounts could be considered as trade discounts.
3. The conditionality and transparency of the discount scheme.
4. The validity of the Collector's order setting aside the Superintendent's approval of the price lists.

Issue-wise Detailed Analysis:

1. Legality of the approval of price lists with quantity discounts:

The appellants, M/s. India Paper Pulp, filed price lists that included quantity discounts for their product, Magnesium Lignosulphonate, under Heading No. 3804.00 of the Central Excise Tariff Act, 1985. These price lists were approved by the Range Superintendent, Central Excise. The Collector, Central Excise, Calcutta-II, later considered these approvals to be illegal, stating that the contracts were conditional and the necessary documents were not provided to establish the quantity off-take.

2. Whether the quantity discounts could be considered as trade discounts:

The appellants argued that the quantity discounts were in the nature of trade discounts and were known to the buyers at the time of removal of goods. They relied on the Supreme Court decision in Union of India v. Bombay Tyre International, which held that trade discounts should be allowed as deductions from the sale price if established under agreement or terms of sale. The Tribunal found that the discounts were built into the price structure, and the net discounted price was charged at the time of removal from the factory, thus qualifying as trade discounts.

3. The conditionality and transparency of the discount scheme:

The Collector (Appeals) set aside the approval of the price lists, arguing that the discounts were not ascertainable at the time of removal and that the full price should have been declared with the proposed rebate. The appellants contended that the discount scheme was transparent and known to the buyers through their circular dated 10-4-1987. The Tribunal noted that the discounts were based on monthly off-take and were payable on a quarterly basis by way of credit notes. The net discounted price was firmly arrived at and declared in the price lists, which were approved by the Central Excise Officer.

4. The validity of the Collector's order setting aside the Superintendent's approval of the price lists:

The Tribunal found that the Superintendent, Central Excise, had verified the contracts and approved the prices without any condition. There was no evidence that the approval was erroneous or that any relevant information was withheld by the appellants. The Tribunal referred to several judgments, including Union of India v. Bombay Tyre International and Moped India Ltd. v. Assistant Collector, Central Excise, which supported the admissibility of trade discounts. The Tribunal concluded that the discounted net prices were firm and should be considered as trade discounts.

Conclusion:

The Tribunal set aside the Order-in-Appeal No. 163-165/Cal-II/RA/89, dated 27-7-1989, passed by the Collector of Central Excise (Appeals), Calcutta, and allowed the appeals with consequential relief. The Tribunal held that the quantity discounts were in the nature of trade discounts and were admissible deductions from the assessable value.

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