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TMI Blog1984 (12) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellants to these distributors. The appellants despatched the goods to the Chief Distributors from their factory on consignment/transfer basis. These distributors explore the market and sell the goods according to the areas assigned to them. These distributors normally sell their goods to :- (i) Dealers and Retailers, (ii) Bulk consumers such as commercial and industrial houses, builders and building contractors, hospitals, cinema and theatre houses, etc., and (iii) Government buyers under rate contract such as direct demand officers, government and semi-government departments, public sector undertakings, statutory bodies. The appellants fix their price and allow trade discount to the dealers and retailers. The trade discount consists of :- (a) Basic Trade discount, (b) Cash discount, (c) Quantity discount or overriding discount in accordance with its Scheme I, and (d) Quantity discount or incentive bonus discount in accordance with its Scheme II. 3. In their price list the appellants claimed the following deductions from the wholesale cash price : - (a) Basic Trade discount, (b) Cash discount, (c) Quantity discount or overriding discoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion. 7. On the other hand, Shri Jain, the learned SDR has pointed out that there is no allegation about the packing being special or secondary. The packing is one, ordinarily used in the course of trade and provided at the time of removal. It is further contended that because the appellants had never claimed the packing as one of a secondary nature, they cannot rely on the decision of the Bombay High Court in Godrej case cited supra. 8. The acid test, which has to be applied to the contentions of both the parties, is laid down in the latest decision of the Supreme Court in the case of Union of India and Others v. Bombay Tyres International Ltd. (1983 E.L.T. 1896). In para 51 of this ruling, it has been held - ... We must remember that while packing is necessary to make the excisable article marketable, the statutory provision calls for strict construction because the levy is sought to be extended beyond the manufactured article itself. It seems to us that the degree of secondary packing which is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate is the degree of packing whose cost can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count :- 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 agreements 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 invoice price. Shri Bedi further argued that the value should be fixed taking into account the trade discount allowed in the usual course of business. 12. On the other hand, Shri Jain, SDR has pleaded that there can be no res judicata in matters of taxation. As regards bonus he stated that no discount was granted at the time of the removal of the goods and the scheme of incentive bonus based on the performances during the previous year could not be considered as a trade discount. According to Shri Jain, the scheme was more in the nature of a gift or reward and therefore the amount cannot be deducted from the assessable value. 13. We find that the term trade discount has not been define ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price under the Sales Tax Act. The Court held that the rebate or bonus discount granted by the assessee did not directly or indirectly go to reduce the pre-determined or pre-paid sale price and therefore could not be taken to be in reduction of the actual sale price agreed or paid for the goods purchased earlier by the distributors. 15. In the present case the distributors have paid for the goods purchased by them as per the contract or list price. It was only at the end of the year their eligibility to the incentive bonus discount was ascertained on the basis of the purchased turn over for the year. Since the sale price had already been paid at the time of purchase and the bonus discount is determined only after the end of the year, it cannot be termed as trade discount. It would be a sort of reward or gift or incentive for promoting sales. In other words, it is a contingent concession dependent on the basis of the purchased turn over or performance. We also find that in 1981 E.L.T. 801 [Deputy Commissioner of Sales Tax v. Advani Coorlikon (P) Ltd.] the Supreme Court has approved the decision of the Madras High Court and held that bonus discount was not admissible as a deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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