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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 ..... s-a-vis sale to other independent buyers directly. Another transaction stipulated in the agreement was on principal to agency basis wherein the goods are sold to other buyers whose purchase orders were procured by JEPL at a discount in the range of 45% and a commission was paid to JEPL to the extent of 8 to 10 % on such sales. Further, M/s. JEPL holds 17.78% of Shareholding of the appellant Company and there are also common directors between the appellant and M/s. JEPL. 2. Sixty-four show cause notices covering the period from 01.04.1987 to 13.03.1996 and 01.04.1997 to 30.06.2000 were issued to the appellant involving total duty of Rs. 3,00,00,799/- on the grounds that JEPL was a related person and the normal price of the goods sold by the appellant should be taken as the price at which the goods were sold by JEPL. It was also alleged that this 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 different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in full by JEPL and incurring expenditure for promotion of the business on behalf of the appellant in consideration of the such commission establishes the mutuality of interest between each other; (ii) the appellant and JEPL being the related person, the issue framed in all the 64 show cause notices proved. 3.1 In appeal, the learned Commissioner Appeals vide OIA dated 01.07.2016 upheld the adjudication order dated 29.01.2016 and also upheld the relationship as a related person and mutuality of interest between the appellant and JEPL passed the following orders:- "6.3. Further, 1 also refer to the CBEC's Circular F. No. 354/81/2000- TRU dated 20.06.2000, which clarifies as under: "As regards discounts, the definition of transaction value does not make any direct reference. In fact, it is not needed by virtue of the fact that the duty is chargeable on the 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided the buyer is not a related person and the price is the sole consideration. CBEC, through Circular No. 354/81/2000- TRU dated 20.06.2000, clarified that explicit mention of discounts in the provisions is unnecessary. The duty is chargeable on the net price after discounts, including quantity discounts. Any discount passed on to the buyer does not form part of the transaction value. The appellant sold goods to JPEL as evidenced by sale invoices transferring property in the goods. Discounts were explicitly mentioned in the invoices and duly passed on to the buyer. JPEL accounted for nearly 50% of the appellant's total sales during the disputed period. Transactions were conducted on a principal-to-principal basis. The appellant transferred ownership of the goods to M/s JPEL at the net sale price mentioned in the invoices. No additional consideration or flowback of funds from M/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 cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l considerations entered in the determination of such a price, the customer cannot be held to be a related person' merely because he holds 50% shares in the manufacturing Company. In the case of Alembic Glass Industries Limited v. Collector of C. Ex. & Cus. (2002) it has been held that Shareholding alone does not establish interest in the business. Ld. Counsel has further argued that the demand of Rs. 3,00,00,798/- was raised by computing duty on the list price, ignoring all discounts mentioned in the invoices. Even if the additional discount (8-10%) were disputed, the entire set of discounts granted could not have been disregarded. 5. On the other hand Shri Rajesh Nathan, learned Asst. Commissioner, (AR) argued on behalf of the Revenue and he reiterated the findings given in the impugned Order-in-Appeal. 6. We have carefully gone through the rival arguments. At the outset, we express 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 custome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchaser 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 normal invoice trade discount (although it might have been shown as a commission) which is passed 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 by the learned advocate for the appellants. 1.1 From the above referred judgment, it is ample clear that the normal trade discount, which the instant 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contents as given in para 1.1 of the Revenue's appeal filed with the Tribunal. Whether the extra discount passed on to JEPL in their invoices is a part of "trade discount" or is a "Commission". To examine the issue, we refer to the judgment of the Hon'ble Apex Court in the case of 1990 (47) E.L.T. 202 (S.C.) - SESHASAYEE PAPER AND BOARDS LTD. Versus COLLECTOR OF C. EX. Cited by the Revenue in their appeal. The extract of the judgment is reproduced below : - "3. The appellant is a public limited company engaged inter alia in the manufacture of paper and paperboards which were assessable under Tariff Item No. 17 of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as "the Central Excises Act"). The period with which we are concerned in this appeal is the period September 9,1979 to July 26,1983. The appellant filed several price lists in Part I and Part II in respect of the clearances of paper and paperboards 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 brie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchasers. It was urged by Dr. Gauri Shankar, learned counsel for the appellant, that although the discount allowed to the Indentors in respect of some of the aforesaid sales might have been described as service charge discount that name could not govern the real nature of the transaction and the discount was really a trade discount. It was submitted by him that this discount should have been allowed as a deduction in the determination of the normal price of the aforesaid goods for the purpose of levy of excise duty. He relied upon the decision of this Court in Union of India & Ors. v. Bombay Tyres International Pvt. Ltd. -1984 (17) -E.L.T. 329 (S.C.) and submitted that the nomenclature given to the discount could not be regarded as decisive of the real nature of the discount. There can be no quarrel with this proposition. But it is equally well settled that in the determination of the normal price for the purposes of levy of excise duty, it is only a 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 (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l fact-finding authority. No other contention has been raised before us. 5. In our opinion, there is no merit in the appeal. 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." 11. It is clear from the above judgment that wherever the invoice is issued 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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