1995 (2) TMI 166 - AT - Central Excise

Summary

Issues:
Whether supply of plastic shaker and spoon along with packets of Mango Complan and Glucon-D qualifies as a trade discount for deduction in determining the assessable value of the goods manufactured and cleared by the appellants.

Analysis:
The appellants contended that the gifts offered to customers were in the nature of a discount, specifically a quantity discount, permissible under Section 4 of the Act. They argued that trade discount, regardless of its form, should be deducted from the price in determining the value, citing various precedents. They emphasized that excise duty is on manufacturing cost and trade discount need not be in cash but can be in the form of goods, such as free items. The appellants also highlighted that the free supply of items can be considered as part of sales promotion, akin to a discount in kind.

The Department, represented by the JDR, argued that the supply of free gifts should not be considered a quantity discount eligible for deduction under Section 4(i)d(ii) of the Act. They contended that the free gifts were incentives for customers and part of sales promotion, not falling under the category of trade discount. They cited case law to distinguish between selling expenses and discounts, emphasizing that the value of gifts cannot be regarded as trade discount.

Upon careful consideration of the submissions and relevant legal definitions, the Tribunal concluded that trade discount is a deductible item under Section 4(4)d(ii) for determining the assessable value. The term "trade discount" was defined, and it was noted that it can be in cash or in kind, not restricted by the Act. Quantity discount, a form of trade discount, was deemed permissible if offered in the form of goods. The Tribunal clarified that gifts given as incentives for sales promotion do not qualify as trade discounts. It was emphasized that trade discounts can be in the form of cash or goods, provided they are not discretionary but based on specific conditions at the time of goods removal.

The Tribunal referenced various case laws to support its decision, highlighting that gifts given with a specific right to the buyer can be treated as trade discounts. It was noted that the intention behind giving free gifts to unrelated retail buyers is promotion of sale, and expenses on promotion and advertisement are not deductible from the assessable value. Ultimately, the Tribunal upheld the lower order, dismissing the appeal and ruling that the supply of plastic mug shaker and spoon, along with the products, constituted gifts and not trade discounts, hence not deductible in determining the assessable value of the goods.