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TMI Blog1993 (9) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Tribunal. 2. First plea made by the learned advocate, Shri S.K. Bagaria for the appellants is that confirmation of duty to the aforesaid extent by the original authority is beyond the show cause notice dated 28-2-1985 inasmuch as the said notice merely alleged disallowing of certain deductions claimed by the appellants in their price lists. It did not seek to demand any duty. In order to appreciate this pleading, we reproduce below the relevant portion of the show cause notice :- Please refer to your letter Ref. No.134, dated 15-2-1985 enclosing the price lists stated above. On examining of your papers pertaining to admissibility of cost of elements of deductions viz. (a) Durable and Returnable special secondary packing (b) Cash discount (c) Transportation/freight charges (d) Transit Insurance (e) Selling Agent s Commission (f) Turnover tax (g) Quality discount, it transpires that you have claimed the aforesaid deductions without observing the stipulations as contained under the provisions of section 4 of the Central Excises Salt Act, 1944. You are, therefore, requested to show cause to the undersigned as to why your claim for deduction of elements of above n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period 1979-80 to 1984-85 of total transactions through the distributors and the data of purchases made by the distributors themselves. This is as under :- Year Total transaction through the distributors. Purchases made by the distributors themselves (included in 2) Rs. Rs. 1979-80 2,05,68,387 65,25,737 1980-81 2,59,08,998 86,47,384 1981-82 2,40,99,624 77,71,176 1982-83 2,57,92,582 87,93,133 1983-84 2,96,08,263 1,08,72,386 1984-85 3,07,55,308 1,02,33,369 Learned advocate has fairly conceded that so far as the commission paid to the distributors on account of the orders secured by them on behalf of the other dealers is concerned the same is not permissible in view of the Supreme Court s judgment in the case of Coromandal Fertilisers relied upon by the lower authorities. He, however submits the proposition that if the distributors themselves have purchased the goods on a principle to principle basis from the manufacturers, the trade discount permissible to the dealers as allowed by the manufacturers should also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue. We are inclinded to agree with the learned advocate for the appellants. Relevant extracts from para 5 of the Supreme Court s judgment in the case of Seshasayee Paper Boards Ltd. are reproduced below :- 5...............There will, however, be one clarification that, as agreed to learned Attorney General, if in any case the purchaser named in the invoice is the same as the Indentor, normal trade discount given to the Indentor will be allowed as a deduction in the determination of the normal price for the levy of excise duty subject to other relevant considerations. Indentor referred to by the Apex Court in the case of Seshasayee Paper Boards Ltd. has the same status as the distributor in the instant case. Therefore, wherever, the invoices indicate that the distributor himself has purchased the goods, the normal trade discount (although it might have been shown as a commission) which is passed on by the appellants to the dealer should be allowed to the distributor as well. However, the commission allowed to the distributors by the appellants in respect of orders procured by the distributor from other dealers shall not be allowed as a discount, as conceded to by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Novelities Glass Industries). (5) 1991 (52) E.L.T. 261 (Tribunal) - (P.P.Patel Co. v. CCE). The submissions of the appellants as regards the said secondary packing were accepted by the learned Collector (Appeals) himself in his Order-in-Appeal Nos. 391-402/Cal.-I/87 dated September 18, 1987 for the subsequent period. Alternatively he submits that the packings in question namely, hessian, paper cores and card board discs were of durable nature and were returnable by the buyers to the appellants and thus in any event the cost thereof was liable to be excluded from the assessable value. There was a clear agreement/arrangement between the appellants and its buyers that the said packing would be returnable by the buyers and in case they return the same, the appellants would accept such return and would refund the cost thereof to the buyers. The agreement/arrangement was clearly recorded in the letters of the distributors produced by the appellants before the Assistant Collector alongwith its reply dated March 18, 1985 (Pages 42 to 59 of Paper Book No. 3). The agreement/arrangement was also recorded in Para 31 of the said Minutes of the 20th Annual Line Distributors Conference hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the claim of the appellants as regards the said packing being of durable nature and returnable by the buyers was accepted by the Assistant Collector himself in an earlier order dated June 13, 1980. The said order was accepted by the Department also and no further appeal was filed and/or other proceeding was initiated for setting aside the same. 2.10 On the aforesaid submissions he urges that the cost of the aforesaid secondary packing consisting of Hessain, Card Board Discs, Paper Tubes etc., as aforesaid, should be excluded from the determined value of the aforesaid goods. He relies on - (1) 1987 (27) E.L.T. 598 (SC) - (K. Radha Krishaiah v. Inspector of Central Excise) (2) 1988 (36) E.L.T. 727 (SC) - (Mahalakshmi Glass Works Pvt. Ltd. v. CCE) (3) 1989 (40) E.L.T. 139 (Tribunal) - [CCE v. EID Parry (India) Ltd.] (4) 1991 (51) E.L.T. 281 (HC) - (Wipro Products Ltd. v. U.O.I.) (5) 1992 (57) E.L.T. 173 (Tribunal) - (Maharashtra Vegetable Products Ltd. v. CCE) 2.11 Learned SDR, on the other hand, submits that all goods are being sold by the appellants in so-called secondary packing even in respect of sales to local dealers in Calcutta. Accordingly, he submits that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to you, the cost of the same will have to be reimbursed by you to our dealers. It will be seen from the above that the understanding is between the distributors and the appellants although the distributors appear to be doing it on behalf of the dealers. Nothing has been brought on record, as claimed in this letter that the dealers in any way have agreed to get the goods in the so-called special secondary packing with the clear understanding of returning the said special packing against reimbursement of the cost of such special packing. Law on the subject is very clear that the arrangement or agreement for returnability of the goods has to be between the manufacturer (assessee) and the customer. That being so, in the present case the letters from dealers on behalf of the customers/buyers cannot be treated as creating an arrangement or agreement between the appellants and the buyers. It has also not been shown by the appellants that during the relevant period any clearance has been made of the goods without the so-called special secondary packing. In other words, the plea made by the learned SDR that all clearances during the relevant period have been made by the appellants in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not availed by all the buyers. The Collector (Appeals) upheld the order passed by the Asstt. Collector by holding that cash discount is an incentive to encourage the buyers to make the payment within the stipulated time and that it was not being granted at the time of clearance of the goods and in respect of every clearance and as such it would not be allowed. It is submitted that the said reasons are no reasons at all. Cash discount was being uniformally allowed by the appellants to all its buyers in terms of the circulars issued from time to time wherein it was clearly agreed that if the payments were made within the stipulated period, cash discount would be allowed at the rate of 2%. The nature and extent of the said cash discount was known to all the buyers/dealers/distributers at or before removal of the goods from the factory. It was open to each of the buyers of the appellants goods to avail the said cash discount by making the payment within the stipulated period. In case, the payments were made in advance, the amount of cash discount used to be deducted in the invoice itself. In other cases where the payments were to be collected through the banks, on the bank advice its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction claimed by the appellant was only of the cash discount actually allowed by it to the buyers. It is submitted that the said discount could not be disallowed simply because it was not availed by all the customers. It is now well settled that deduction on account of the said discount is permissible even if it is not uniformly availed by all the customers. Reliance in this connection is being placed on the following decisions :- (1) 1984 (17) E.L.T. 4 (HC) - Jenson Nicholson India Ltd. v. UOI (2) 1986 (24) E.L.T. 269 (Mad. HC) - UOI v. SSM Bros. Pvt. Ltd. (3) 1988 (34) E.L.T. 373 (CEGAT) - Bhartia Cutler Hammer Ltd. v. CCE (4) 1986 (25) E.L.T. 1032 (Bom. HC) - Music India Ltd. v. UOI (5) 1992 (59) E.L.T. 23 (Mad. HC) - Rathana Fire Works Factory v. Supdt. of Central Excise 2.16 Learned SDR reiterates the findings of the adjudicating authority to the effect that this discount is not available inasmuch as it has not been extended to all the buyers. 2.17 We have carefully considered the pleas advanced on both sides. Nature of cash discount is such that it cannot be given to all the buyers. It is given to only such buyers who made prompt payments during the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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