1984 (8) TMI 80 - SC - Central Excise

Whether on a true consideration of the Notification No. 25/70, dated 1-3-1970 issued by the Government of India, the appellant is entitled to claim exemption from the imposition of excise duty on fertilisers which, according to the appellant, are mixed fertilizers manufactured by the appellant? Whether the amount of commission paid by the appellant to its selling agents should be deducted as trade allowance in computing the value of the goods for assessment of excise duty? Held that - A wrong decision in favour of any particular party does not entitle any other party to claim the benefit on the basis of the wrong decision. We are, therefore, clearly of the opinion that the fertiliser manufactured by the appellant in respect of which claim for exemption under the Notification is made is not a mixed fertiliser within the meaning and scope of the Notification and we have no hesitation in rejecting the case of the appellant, expressing our agreement with the reasons stated in the judgment of the High Court. Commission paid to an agent for services rendered by him in the matter of sale of the product of the appellant on behalf of the appellant on the basis of the agreement the appellant had with its selling agents cannot be considered to be in the nature of such trade discount as may qualify for deduction in the computation of the assessable value of the goods for the purpose of levy of excise duty. The commission paid to the selling agents is not a trade discount given either to the wholesale buyer or to the retail buyer, it is not given to the consumer or the trader. The commission paid on the basis of the agreement to the selling agent by way of remuneration for services rendered by the agent cannot by any process of reasoning be said to be trade discount payable or paid at the time of removal of the goods from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production. The amount of commission paid to the selling agents, therefore, is not trade discount within the meaning of the Explanation to section 4 of the Act and does not qualify for any deduction. In our view, the High Court was clearly justified in rejecting this claim of the appellant. Against assessee.

Summary

Issues:
1. Exemption from excise duty under Notification No. 25/70.
2. Deduction of commission paid to selling agents as trade allowance in computing the value of goods for excise duty assessment.

Detailed Analysis:

1. Exemption from Excise Duty under Notification No. 25/70:

The appellant sought exemption from excise duty for its fertiliser, Gromor N.P.K. 14:35:14, under Notification No. 25/70, claiming it to be a mixed fertiliser. The notification exempts mixed fertilisers manufactured from two or more fertilisers from excise duty. The appellant argued that Gromor N.P.K. 14:35:14, produced by mixing Rock Phosphate and Muriate of Potash with the aid of power, qualifies for this exemption. The appellant contended that the notification should be interpreted based on its plain language and that the explanation added to the notification should not restrict its scope.

The High Court rejected this claim, stating that the notification clearly intended to exempt only mixed fertilisers manufactured from two or more fertilisers and not those involving other substances like Sulphuric Acid and Ammonia. The High Court emphasized that the notification's language and the explanation provided therein made it evident that the exemption was limited to mixtures of fertilisers only.

The Supreme Court agreed with the High Court's interpretation, noting that the explanation forms part of the notification and must be considered in its entirety. The Court held that Gromor N.P.K. 14:35:14 did not qualify for the exemption as it involved the use of additional substances beyond the specified fertilisers. The Court also dismissed the appellant's grievance about a rival company receiving the benefit under similar circumstances, stating that a wrong decision in favor of one party does not entitle another party to the same benefit.

2. Deduction of Commission Paid to Selling Agents as Trade Allowance:

The appellant claimed that the commission paid to its selling agents should be deducted as a trade allowance in computing the value of goods for excise duty assessment. The agreements with the selling agents indicated that they were appointed to secure orders, execute sales, and realize payments on behalf of the appellant, for which they received a commission.

The High Court rejected this claim, stating that the commission paid to agents for services rendered cannot be considered a trade discount eligible for deduction in determining the assessable value of goods. The Court emphasized that the commission was remuneration for services rendered by the agents and not a trade discount given to wholesale or retail buyers.

The Supreme Court upheld the High Court's decision, noting that the commission paid to selling agents does not qualify as a trade discount under the Central Excises and Salt Act, 1944. The Court clarified that such commission is not a deduction from the price or commodity agreed to be paid or transferred but a payment for services rendered by the agents. Therefore, it does not qualify for deduction in the computation of the assessable value of goods for excise duty purposes.

Conclusion:

The Supreme Court dismissed the appeals and special leave petitions, affirming the High Court's judgment. The appellant's claims for exemption from excise duty under Notification No. 25/70 and for deduction of commission paid to selling agents as trade allowance were both rejected. The Court made no order as to costs.