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TMI Blog1992 (3) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... er sales service etc. which could be treated as post manufacturing operation. It is thus clear from the submission made by the appellant itself before the Central Government that the discount to area distributors was also in consideration for also providing after sales service which is not required to be taken into account while dealing with trade discount within the meaning of explanation to Section 4(a) of the Act. Therefore the Central Government rightly did not take into account such area distributors who may have to provide after sales service. The trade discount given to such wholesalers who were under no obligation to provide after sales service is the relevant trade discount given to the wholesalers. In view of our conclusion on the first point itself no useful purpose would be served in examining the second question as the appellant himself had given the reasons before the Central Government as to why they gave higher trade discount to their depots and other area distributors. Appeal dismissed. - 1773 of 1981 - - - Dated:- 10-3-1992 - S. Ranganathan, V. Ramaswamy and Yogeshwar Dayal, JJ. [Judgment per : Yogeshwar Dayal, J.]. - This Civil Appeal arises from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed; the trade discount allowed has to be at uniform rate as held by the Supreme Court; once the wholesale price is fixed and the quantum of trade discount is decided it must be given uniformly to all wholesalers irrespective of their relations with the manufacturers. The Assistant Collector observed :- "The party had admitted that they have three types of wholesale dealers and each of them allowed trade discount at different rate. The first category of wholesale dealers numbering about 15 got the maximum trade discount. A perusal of the list of these 15 wholesale dealers reveal that most of them are merely selling Depots of the party who get the maximum trade discount in comparison to other types of wholesale dealers of the party. The Hon'ble Supreme Court has held that the wholesale price has to be ascertained only on the basis of transactions at 'arm's length'. Their Lordships have further opined that if there is a relative of the manufacturer and if he is charged specially low price, the price charged would not constitute the wholesale cash price for levying the excise duty. The maximum trade discount allowed to a particular class of wholesale dealers which is mostly cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 30% was allowed to him while if the goods were despatched on the advice of the area dealer to any of his sub-dealer, the discount advised by him to be granted to the sub-dealers was passed on to the sub-dealers while the discount remaining out of the 30% was passed on by a credit voucher to the area dealer. In either case the full discount of 30% was being passed on to the trade on all wholesale transactions. The above contention of the appellants was verified from the sales invoices produced by them in respect of the wholesale transactions and it was noticed that the above contention of the appellants is correct. It was also noticed that some sales were also made in small lots by the appellants to the dealers falling outside the jurisdiction of the area dealers. These sales represented 1% to 9.7% of the total sales and could be regarded as sales to retailers. In their case the discount passed on was less than 30% discount allowed in the case of wholesale dealers. It was explained that in view of the fact that such dealers did not have the facility and the technical know-how for providing after sale service, the discount allowed to them was lesser than that allowed to the dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g :- (a) Area dealers which number about 15 get the maximum trade discount; (b) The sub-dealers of these area dealers. These sub-dealers usually get the goods from the area dealers at the particular discount and can also get the goods directly from the party on a discount advised by the area dealers and the balance discount out of the total 30% discount is passed on thereafter to the area dealers; and (c) The last category of dealers who operate in area covered by the area dealers and get a less amount of discount. 9. It also appears that approximately 90% of the goods are sold through the area dealers or their sub-dealers and only the rest through other independent dealers. 10. The Appellate Collector held that the sales to dealers other than the area dealers were only upto 10% of the total sales and as such these could be regarded as a sales to retailers. Accordingly the Appellate Collector held that since a substantial quantity of goods was sold through the area dealers or their sub-dealers the price charged to them was the correct wholesale cash price and that the 30% trade discount given to them was admissible and sales to other dealers which were in small quantity c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur suppliers of electric motor, we have to recover the same from the parties to whom monoblock pumps are sold. (B) Had we sold only an Electric motor, the same recovery of duty would have been made separately by us and our cost would have been the price paid to supplier exclusive of central excise duty. (C) Just because the motor is used in the manufacture of Monoblock Pumps, it does not deprive us of our right to recover the duty on the Electric Motor paid by us when this is ascertainable. (D) The same would be the case in respect of other components of Monoblock pumps, viz. Steel, paint, shafting, material etc. However, we are not in a position to ascertain the duty paid on these Raw Materials. That is why we have to recover the total amount including the cost and Central Excise duty paid on the Raw Material, so that the Central Excise duty paid on them will automatically be recovered. Such an amount has to go into the total value. But in respect of the items of the raw materials if we can ascertain the central excise duty paid, we can certainly recover the same in form of duty and not by way of the cost of the material. (E) The whole principle of costing is to see what a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii (B) Out of our total production 90% of the goods are marketed through area dealers to whom 30% discount is given. Out of these 15 area dealers, 5 are quite independent parties not connected with the depots and they are responsible for marketing about 30% of our total production and the sales to these dealers are from principal to principal and are at arm's length. ii (C) The Kirloskar Brothers' depots are being treated on par with these area dealers and the dealings are from principal to principal. Simply because they are depots of Kirloskar Brothers it cannot be presumed that the dealings are not at arm's length. ii (D) It is not the case of department that the goods are sold to these area dealers at a specially low rate. The facts that there are 5 independent dealers alongwith depots goes to prove that no special treatment is accorded to the depots. ii (E) We would insist with all force that these transactions are at arm's length and these represents the normal trade practice. The sales to independent dealers may not be treated as retail sales but there is no reason as to why the price charged to these few so-called independent dealers should be preferred to the price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales service etc. which could be treated as post-manufacturing operations. It was pointed out to them during the course of personal hearing that majority of the so-called area distributors were depots of M/s. Kirloskar Brothers Ltd. only. They contended that though the overall controlling authority was the Kirloskar Group of Companies, yet these depots were independent entities by themselves. They were asked to submit detailed information about the composition of all the Directors of M/s. Kirloskar Electricals, Bangalore, the Directors of Dewas factory and their agreements with various area distributors with their sub-distributors. The information was to be submitted by November 16,1976 but could not be received within the time stipulated." 13. The Central Government after considering the points raised by the appellant in its written reply to the show cause notice as well as points urged during the course of personal hearing took the view that under Section 4 of the Act the abatement of duty is admissible only in respect of the article in question and not the duty paid on the raw material or the component which had gone into its manufacture, and accordingly held that the view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy excise duty on excise duty paid. The High Court rejected the contention. As regards the deduction of trade discount the High Court agreed with the order of the Central Government. 15. Before us learned counsel for the appellant has submitted that the Central Government erred in disturbing the appellate order of the Collector and submitted - (1) that besides the depots of the appellant there are other five independent wholesalers and the Central Government should not have ignored the trade discount allowed to them; (2) that the Central Government, though had passed the impugned order only on 14th April, 1977, did not refer to the information which was submitted after 16th November, 1976; (3) that the Central Government ignored the Notification No. 84/72-C.E., dated 17-3-1972 as amended by Notification No. 113/72, dated 22-3-1972 and (4) that while computing the assessable value the duty paid on electric motors for purposes of manufacturing monoblock pumps was also liable to be excluded. 16. It will be noticed that we are concerned with old Section 4 of the Act as operative during the relevant time. 17. In A.K. Roy Another v. Voltas Limited [(1973) 2 SCR 1089 = 1977 (1) E. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther observed thus: "A part may be goods as known in the excise laws and may be dutiable. If the indicator system is a separate part and a duty had been paid on it and if the rules so provide then the appellant may be entitled to abatement under the rules. But if the end product is a separate product which comes into being as a result of the endeavour and activity of the appellant then the appellant must be held to have manufactured the said item. When parts and the end-product are separately dutiable - both are taxable." 20. Section 4(a) of the Act read with its explanation reads as under :- "4. Determination of value for the purposes of duty. - Where, under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be - (a) the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of the removal of the article chargeable with duty from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production, or if a wholesale market does not exist for such article at such place, at the nearest pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise duty under Section 2A of the Indian Tariff Act, 1934 (32 of 1934) as the case may be already paid on such internal combustion engine or Electric Motors. (ii)..... Provided further that where the duty of excise leviable on power driven pumps is less than the amount of duty of excise or the additional duty under Section 2A of the Indian Tariff Act aforesaid specified in clause (i) or as the case may be calculated under clause (ii) of the first proviso with respect to internal combustion engine, elect, motor, rotors or stator then no part of the duty so specified or calculated shall be refunded to the manufacturer." 23. It will be noticed that first part of the Notification exempts the 'Power Driven Pumps' falling under Tariff Item No. 30A of the First Schedule to the Act and reduces the duty to 10% ad valorem. 24. To understand more conveniently the meaning and scope of provisos, the provisos shorn of unnecessary words may be read as under :- "Provided that; - (i) Where the aforesaid pumps on which the duty of excise is leviable are fitted with duty paid .... Electric motors .... such power driven pumps shall also be exempted from so much of the duty of excise leviab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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