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TMI Blog2001 (9) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... ture different kind of yarns that their duty liability for the period from 1-3-1994 to 28-2-1995 was assessed provisionally, under Rule 9B of the Central Excise Rules; that they were giving a fixed discount @ 2% to every buyer; that after finalisation of the assessment, the Assistant Commissioner, under Adjudication Order No. 49/98, dated 6-1-1999, confirmed the demand of Central Excise duty amounting to Rs. 20,09,082/- and imposed a penalty of Rs. 4 lakhs on the ground that Rs. 3,41,059/- was not deductible as trade discount as no proof of passing on the same to the customers was produced and that dyeing charges were also not deductible; that on appeal, Commissioner (Appeals) allowed the deduction in respect of dyeing charges; that he, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 4(4)(d)(ii) of the Central Excise Act, value does not include the trade discount (such discount not being refundable on any accouant whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of goods sold or contracted for sale; that this is apparent from this provision that the discount has to be passed on to the buyers and it should not be refundable on any account whatsoever. He, further, emphasised that the fact that the payment of trade discount is a must is evident from the Explanatory decision of the Supreme Court in the case of Union of India v. Bombay Tyres International Pvt. Ltd., 1994 (117) E.L.T. 329 (S.C.) wherein the Apex Court observed that the trade discount shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold, or contracted for sale. 6.1 The Apex Court in the landmark decision in Bombay Tyres International clarified as follows :- Trade Discounts - Discounts allowed in the Trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreement or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such Trade Discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to trade discount @ 10%. The cash discount was given if payment was made in cash. In the present matter before us, the discount sought to be deducted is Trade Discount, which is different from cash discount. The Supreme Court clarified this distinction in the case of Dy. Commissioner of Sales Tax (Law) v. Advani Coorlikon (P) Ltd., 1981 (8) E.L.T. 801A (S.C.) by observing that The two concepts are wholly distinct and separate. Cash discount is allowed when the purchaser makes payment promptly or within the period of credit allowed. It is a discount granted in consideration of expeditious payment. A trade discount is a deduction from the catalogue price of goods allowed by wholesalers to retailers engaged in the trade. The allowance enabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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