1993 (9) TMI 244 - AT - Central Excise

Issues Involved:
1. Confirmation of duty beyond the show cause notice.
2. Commission paid to various distributors.
3. Cost of secondary packing and cost of durable and returnable packing.
4. Cash discount.
5. Special discount.

Detailed Analysis:

1. Confirmation of Duty Beyond the Show Cause Notice:
The appellants argued that the confirmation of duty by the original authority was beyond the scope of the show cause notice dated 28-2-1985, which only alleged the disallowance of certain deductions without demanding any duty. The Tribunal agreed with this plea, stating that no demand of duty can be made unless a show cause notice to that effect is given, as established by various Supreme Court judgments. Consequently, the impugned order was set aside on this ground alone, with the Revenue being given the liberty to issue a fresh show cause notice for the demand of duty.

2. Commission Paid to Various Distributors:
The appellants contended that the commission paid to distributors for orders they secured should be allowed as a deduction. However, they conceded that this commission is not permissible for orders secured on behalf of other dealers, based on the Supreme Court's judgment in the Coromandal Fertilisers case. The Tribunal agreed that if the distributors purchased the goods on a principal-to-principal basis, the trade discount permissible to dealers should also be available to such distributors, citing the Supreme Court's judgment in Seshasayee Paper & Boards Ltd. Therefore, the commission allowed to distributors for their own purchases was permitted, but not for orders procured from other dealers.

3. Cost of Secondary Packing and Cost of Durable and Returnable Packing:
The appellants argued that the cost of secondary packing, such as Hessian, Card Board Discs, and Paper Tubes, should be excluded from the assessable value, as it was primarily for protecting the goods during transportation. They also claimed that these packings were durable and returnable, which should further exclude their cost from the assessable value. However, the Tribunal found that the so-called special secondary packing had become the normal packing for wholesale market sales at the factory gate. Nevertheless, for distributors who purchased goods on their own account, the Tribunal allowed the exclusion of the cost of durable and returnable packing.

4. Cash Discount:
The appellants introduced a scheme for allowing a 2% cash discount if payment was made within a stipulated period. The lower authorities disallowed this claim, arguing that not all buyers availed of the discount. The Tribunal found this reasoning faulty, stating that cash discounts are inherently not given to all buyers but only to those who make prompt payments. The Tribunal allowed the cash discount that was actually passed on to customers, citing established legal principles.

5. Special Discount:
The appellants claimed special discounts were allowed in the invoices themselves for various reasons, such as old designs or excess production. The lower authorities disallowed this claim, arguing that there was no consistent policy for such discounts. The Tribunal, however, found that the nature and extent of the special discount were known at or prior to the removal of the goods, satisfying the Supreme Court's ruling. Therefore, the special discount claimed by the appellants was allowed.

Conclusion:
The Tribunal set aside the impugned order on the ground that the confirmation of duty was beyond the show cause notice. It allowed the commission paid to distributors for their own purchases, the cost of durable and returnable packing for such distributors, the cash discount actually passed on to customers, and the special discount claimed in the invoices. The Revenue was given the liberty to issue a fresh show cause notice for the demand of duty.

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