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TMI Blog2024 (12) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee showing two separate discounts in the invoice in whatever name they may be called one payable to the Indentor/ Distributor/ Dealer and other payable to the purchaser whose name is mentioned in the invoice itself, the discount payable to the Indentor/ Distributor/ Dealer is to be considered as a Commission and will not be entitled for an admissible deduction. But when the Indentor/ Distributor/ Dealer purchases in his own account, such a discount mentioned on the invoice will be considered as a normal discount and there can be no objection to the discount given to him and such discount need not be the same as passed on to the other purchasers. The law does not require the same to be as the Indentor/ Distributor/ Dealer constitutes a separate class of buyers and there can be different prices for the separate class of buyers - it is further observed that the impugned order has misapplied the ratio of the Board s Circular 354/81/2000-TRU dated 20.06.2000 in as much as the scope of the Circular is between the seller and the buyer i.e. it must be established that the discount of a given transaction has actually been passed on to the buyer of the goods. Here in the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is additional discount of 8 to 10% was nothing but in the nature of commission as the agreement envisages the sale on a principal to agent basis also wherein the same percentage was paid as commission. While issuing show cause notice the whole of the list price was taken to be the assessable value for determination of excise duty and differential duty was worked on difference in list price and the value at which duty was paid by the appellant after discounts to JEPL. All the show cause notices were confirmed by the jurisdictional Deputy Commissioner vide order dated 26.12.2001 wherein the adjudicating authority held that there is mutuality of interest, between the appellant and JEPL. In appeal, the Commissioner (Appeals) vide order-in-appeal dated 25.09.2003 allowed the appeal holding that :- (a) The allegation of Related person doesn't exist and that JEPL was a bulk buyer and the bulk buyer and small buyers fall under two different class of buyers as held by Hon'ble Supreme Court In case of M/s. Metal Box India Ltd. vs. Collector, Madras Accordingly, additional discount of 8 to 10% to M/S. JEPL is allowable as M/S. JEPL is a bulk buyer. 3. The order-in-appeal dated 25.09.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net price paid or payable. Thus if in any transaction a discount is allowed on declared price of any goods and actually passed on the buyer of goods as per common practice, the question of including the amount of discount in the transaction value does not arise. Discount of any type or description given on any normal price payable for any transaction will, therefore, not form part of the transaction value for the goods, e.g. Quantity discount for goods purchased or cash discount for the prompt payment etc. will therefore not form part of the transaction value. What is important is that it must be established that the discount of a given transaction has actually been passed on to the buyer of the goods. I make few conclusions from above extract of the circular which I refer hereunder: Discount is allowed as deduction only when it is passed on to the buyer; but in the instant case commission of 8% to 10% (further discount) is not passed on by M/S. JEPL same is absorbed by them as Profit. Different discounts can be given to different unrelated buyers, but it should be in the normal course of business; but in the instant case commission of 8% to 10% (further discount) is not passed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s JPEL to the appellant occurred. An additional discount of 8-10% was granted to JPEL for substantial quantity purchases. There is no restriction in law on conducting business in this manner, and the discounts were purely based on commercial considerations. Section 4(4)(c) requires satisfying three conditions to treat a buyer as a related person i.e. a. Mutuality of interest; b. The buyer must qualify as a related person under statutory definitions; c. The price charged must be lower than the normal value due to extra commercial considerations. In the present case, none of these conditions are satisfied. The appellant and M/s JPEL do not hold interest in each other's businesses. The mere fact that certain directors share blood relations does not establish mutuality of interest. The relationship between the appellant and M/s JPEL is purely of seller and independent buyer. The price charged reflected the large quantity of goods purchased, and no additional commercial flow occurred beyond the net sale price. The appellant relied upon the case laws in CCE v. Xerographic Ltd. (2006) wherein it was held that Section 4(4)(c) applies only when mutuality of interest and related person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss our deep anguish and dissatisfaction in the reckless manner in which the impugned adjudication order and the Oder-in-appeals have been passed. The orders have confirmed the whole demand on the basis of list price whereas the discounts of 45% which have been passed on by the JEPL to their customers were never in dispute and these facts are on record in the show cause notice. The only dispute was in respect of 8-10% additional discount which has been given by the appellants to JEPL in addition to the 45% discount which was available to every buyer. We are also of view that that impugned adjudication order as well as order-in-appeal has misapplied themselves while racking up the issue of related person which was already decided in favour of the appellant in the first round of litigation and had attained finality. The only issue which needed to be decided is whether the additional discount of 8-10% given by the appellant to JEPL was a genuine discount or was Commission being given the colour of discount in the invoices to suppress the value to this extent of 8-10%. It will be worthwhile to reproduce the issues raised before the Tribunal in the grounds of appeal filed by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case on hand is 45%, should only be allowed as permissible deductions to the goods sold to distributors. The sales made directly to customers, on commission basis to the distributor, the commission thus paid shall not be allowed as discount which is not the subject matter of dispute as such sales were made on 45% price only. The extra-discount of 8 to 10% in respect of goods sold to M/S JMPL is not admissible as the value should have been taken as available in respect of sale to other buyers directly or through M/S. JMPL on principal to agency basis. 7. Further, the then Commissioner (Appeal's) OIA No. Commr. (A)/193/Ahd-II/2002 dated 5.3.2002 as relied upon by the Commissioner(A) in part only had also held that the extra discount of 8 to 10% in respect of sales made to M/s. JMPL is not allowable. The said order was not relied upon in it's entirety, the relevant portion of which is reproduced herein below: .. The bulk of sales are to unrelated buyers in the year 96-97 over 87 % and the next year around 53%. Therefore, the normal ex- factory gate pass price sale is available that should be the basis of the assessable value. That being so this is known value for which duty sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards made by the appellant. Section 4 of the Central Excises Act prescribes the mode of valuation of excisable goods for the purposes of charging of the duty of excise. Under clause (a) of sub-section (1) of Section 4, it is provided, in brief, that the duty of excise is chargeable on any excisable goods with reference to value which shall, subject to the other provisions of the Act, be deemed to be the normal price thereof and the normal price, generally speaking, is the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale. In the fixation of the normal price of paper and paperboards manufactured by the appellant for the purposes of levy of excise duty, the appellant claimed several deductions. One of these deductions was described as trade discount and another as service charge discount . The trade discount was the discount paid to the purchaser in accordance with the normal practice of the trade. The appellant had engaged several dealers with a view to promote its sales. A specimen of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal trade discount which is paid to the purchaser which can be allowed as a deduction and commission paid to selling agents for services rendered by them as agents cannot be regarded as a trade discount qualifying for deduction (Coromandel Fertilizers Limited v. Union of India and Ors. -1984 (17) - E.L.T. 607 (S.C.). The correctness of this proposition was not disputed by learned counsel for the appellant but it was submitted by him that in several cases where supplies had been effected pursuant to the aforesaid agreements, the indentors were really themselves the purchasers and hence, the normal trade discount paid to them should have been allowed as a deduction in the determination of the normal price for the purposes of levy of excise duty. We find from the judgment of the Tribunal and the lower authorities that there is no dispute that wherever the Indentors are shown as the purchasers in the respective invoices, the trade discount given to them has been allowed as a deduction. Moreover, to obviate any controversy in this regard, learned Attorney General who appears for the respondent fairly states that when the matter goes back to the Tribunal, the respondent is agreeable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer purchases in his own account, such a discount mentioned on the invoice will be considered as a normal discount and there can be no objection to the discount given to him and such discount need not be the same as passed on to the other purchasers. It is even impractical to think that the discount given to the dealer who further sells the goods to other purchasers on his own account should be the same as the discount given to other purchasers. The law does not require the same to be as the Indentor/ Distributor/ Dealer constitutes a separate class of buyers and there can be different prices for the separate class of buyers. We further observe that the impugned order has misapplied the ratio of the Board s Circular 354/81/2000-TRU dated 20.06.2000 in as much as the scope of the Circular is between the seller and the buyer i.e. it must be established that the discount of a given transaction has actually been passed on to the buyer of the goods. Here in the facts of the case the buyer is JEPL and not their subsequent buyers as has been held in the impugned order. As no flow-back of money has been alleged in the impugned order between the appellant and the JEPL, the trade discount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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