1997 (9) TMI 267 - AT - Central Excise

Summary

Issues:
- Disallowance of trade discount claimed by the respondent.
- Correlation between the respondent and sales effected by wholesalers.
- Allegation of sales to non-approved canteens by wholesalers.

Analysis:

The judgment by the Appellate Tribunal CEGAT, New Delhi involved the disallowance of trade discount claimed by the respondent, a manufacturer of aerated waters. The respondent had filed multiple sets of price lists for different periods, claiming trade discount at specified rates. The Assistant Collector initially disallowed the discount, but the Collector (Appeals) reversed this decision, allowing the deduction. The department challenged these orders, leading to the appeals being heard together due to the identical question at hand.

The sales by the respondent were to wholesalers, who then sold to various categories of retailers, including railway canteens and other canteens. The respondent's practice involved not giving discounts to wholesalers at the time of invoicing; instead, the discounts were quantified and credited in subsequent invoices based on the sales made by the wholesalers. The Assistant Collector's disallowance was based on the lack of knowledge of the exact discount amount before goods were removed and a perceived lack of correlation between the respondent and sales by wholesalers.

The Tribunal rejected the argument that the discount should be disallowed due to the unknown exact quantum before goods removal. It was noted that the trade practice of the respondent and wholesalers was clear from the price lists, indicating the discount rates. The quantification of discounts was postponed until after sales to retailers, as the percentage of goods sold to different types of canteens varied. The Tribunal emphasized that the postponement of quantification did not invalidate the discount claim.

Regarding the alleged lack of correlation between the respondent and sales by wholesalers, the Tribunal found this argument unconvincing, as all goods supplied by the respondent to wholesalers were eventually sold to retailers. Additionally, the contention that sales to non-approved canteens by wholesalers invalidated the discount claim was dismissed. There was no evidence presented that the discount was claimed for sales to non-approved canteens, and the absence of a specific condition regarding approved canteens in the orders further weakened this argument.

Ultimately, the Tribunal found no valid grounds to interfere with the Collector (Appeals) decision to allow the trade discount claimed by the respondent and dismissed the appeals brought by the department.