ORDER
S. Venkatesan, President
1. This appeal was heard by Special Bench A, consisting of Members Shri M. Gouri Sankara Murthy and Shri K. Prakash Anand. The two learned Members have recorded separate orders disclosing a difference of opinion. The points on which there is a difference of opinion have been referred to me as President in terms of the proviso to Sub-section (5) of Section 129C of the Customs Act, 1962, read with Sub-section (1) of Section 35D of the Central Excises and Salt Act,
2. I have heard Shri N.C. Jain, Advocate, for the appellants and Shri V.M. Dopiphode, S.D.R., representing the respondent Collector. The basic facts of the case have been set out in the orders of the two learned Members. However, as the history of the case is somewhat long and complex, it would be helpful to set out the salient facts.
3. The appellants are manufacturers of auto lamps. The goods manufactured by them are sold partly to their 4 distributors, partly to industrial consumers and independent buyers, and partly to M/s. Mico and Caltex (Goods in the last category are sold under the brand name “Mico” and “Caltex”).
4. It may be mentioned at the outset that the scope of the present controversy is in a very narrow compass. It is as regards the admissible discount on goods sold by the appellants to their distributors (there being two different rates of discount).
5. Some material dates in regard to the case are set out below :-
28.12.72 Price list No. 4/72 filed, claiming trade discount of 35.57%.
23.9.73 Price list No. 1/73 submitted, claiming trade discount
of 36%.
13.11.75 First Order-in-Original passed by Assistant Collector,
directing cancellation of price list No. 1/73 and approving
a discount of 20% for goods covered by both price lists.
13.8.76 First Order-in-Appeal passed by Appellate Collector,
setting aside the Assistant Collector's order and direc-
ting a de novo decision.
13.1.77 Second Order-in-original passed by Assistant Collector,
approving a discount of 20% + 5% in respect of the
above two price lists (among others).
14.2.78. Second Order-in-Appeal passed by Appellate Collector,
to the following effect :-
(a) order of Assistant Collector quashed;
(b) assessable values directed to be determined on the
following basis:-
(i) for sales to distributors, minimum discount allowed by
manufacturers to be accepted ;
(ii) for sales to M/s. Mico and Caltex, assessment
to be on prices charged by them to wholesale
dealers after deducting the discount allowed by them.
7.8.78 Appellants filed the Revision Application which is now
before the Tribunal.
12.8.78 Show-cause notice in pursuance of Second Order-in-Appeal issued,
alleging short-levy or Rs. 75,511 + Rs. 8,647.51.
31.1.79 Show-cause notice issued by Government of India under Section
36(2), proposing to revise the Second Order-in-Appeal on
the ground that the distributors were favoured buyers and
the discount allowed to them was not admissible.
20.11.81 Third Order-in-original passed by Assistant Collector, confirming the
demand proposed in the show-cause notice dated 12.8.78.
5.5.82 Review proceedings dropped by Government, accepting
the submission of the appellants that the distributors
could not be regarded as favoured buyers.
17.12.83 Third Order-in-Appeal passed by Collector (Appeals),
New Delhi, setting aside the Third Order-in-original
and directing the case to be decided afresh by disclosing
the evidence on which the demand was based. (We
were informed that no further order has been passed at
the level of the Assistant Collector).
[In making out the above list of dates, I have largely relied on a statement filed by the learned advocate for the appellants on 24.7.85. The statement nowever contains a serious error in regard to the Collector’s order which is the subject matter of this appeal. It quotes that order as holding that the maximum discount allowed uniformly to the 4 distributors would be permissible. What the order actually held was that the minimum discount uniformly allowed would be permissible. 1 would not like to comment further on this, except to say that the Bench is entitled to expect adequate care on the part of advocates when they seek to assist it with information on matters of fact or record.]
6. It will thus be seen that three Orders-in-Original were passed in this case at the level of the Assistant Collector. Each of those orders was set aside on appeal to the Appellate Collector/Collector (Appeals). Arising out of the Second Order-in-Appeal, Government issued a review show-cause notice, and subsequently discharged it. Arising out of the same Order-in-Appeal, the appellants filed a revision application, which is now before the Tribunal as an appeal.
7. It is not clear why a Third Order-in-Original was issued in pursuance of the Second Order-in-Appeal, when that order was the subject of both a revision application and a review show-cause notice. In any case the Third Order-in-original issued in pursuance of the Second Order-in-Appeal has in its turn been set aside and no Fourth Order-in-original has been issued so far. Therefore the appellants’ revision application against the Second Order-in-Appeal dated 14,2.78 remains to be decided. [In the preamble to the orders by the two learned Members, it has been erroneously mentioned that the appeal arises out of the Order-in-Appeal dated 19.12.1983 passed by the Collector (Appeals),’New Delhi.]
8. In the Second Order-in-Appeal dated 14.2.78, giving rise to the present appeal, there were two decisions, one as regards the discount admissible on sales to the 4 distributors and the other as regards the assessable values of goods sold to M/s. Mico and Caltex. As regards the second question, both the learned Members are agreed that the assessable values would be the prices of sales to M/s. Mico or Caltex, as the case might be, and not the prices at which they subsequently sold the goods. This question therefore stands decided by the Bench and does not form part of the reference to me. The reference is confined to the question regarding the discount admissible on sales to the 4 distributors, on which the two learned Members have differed. The questions posed by them are the following :-
(1) Whether, in the facts and circumstances of the case, varying discounts allowed on normal commercial considerations to different customers in one and the same class of buyers qualify for exclusion in the computation of their assessable value in terms of the un-amended Section 4 of the Central Excises and Salt Act, 1944;
(2) If so, whether it is the maximum or minimum of such discounts, or each such discount at actuals in the different transactions, that is to be excluded in the computation of the assessable value?
9. At the hearing before me, the learned advocate for the appellants was requested to clarify the position regarding the discounts offered to the 4 distributors. His reply on the instructions from his clients, was that a total discount of 35.57% was allowed to the appellants’ distributors for the Delhi region and the Madras region. A total discount .of 30.35% was allowed to the distributors for the Bombay region and the Calcutta region. Thus, the question before me is simply whether a discount of 35.57% would be admissible to the Delhi and Madras distributors and a discount of 30.35% to the Bombay and Calcutta distributors, following the reasoning of Member Shri K. Prakash Anand: or whether the minimum discount of 30.35% should be allowed uniformly to the 4 distributors, following the reasoning of Member Shri M. Gouri Sankara Murthy.
10. It may be noted that neither learned Member has expressed any doubt regarding admissibility of each of the discounts per se. The reference has been necessitated only by the existence simultaneously of two different rates of discount, each of which individually would be considered admissible (and has been so held in the review proceedings before the Government of India).
11. From the order of Shri Prakash Anand, it appears that the learned advocate for the appellants advanced two slightly different pleas before the Bench, namely ;- (1) a single assessable value based on the appellants’ prices to their nearest distributor, namely their Delhi distributors (which also happened to be the lowest price) should be adopted; (2) alternatively, there is no justification to insist that the discount should be uniform; accordingly, the discounts as actually allowed to the 4 distributors should be admitted.
12. Shri Jain advanced the same pleas before me. In addition he sought to advance yet a third plea. This was that the discount allowed on the major value of transactions’ (which according to him was 35.57%) should be” allowed. It was pointed out to Shri Jain that at this Stage the question was only of deciding between the views expressed by the : two learned Members on the basis of the pleas advanced before them, and it was not permissible to introduce an entirely fresh plea. Shri Jain was also asked which of the two, pleas placed before the Bench represented the relief sought by the appellants – whether they sought the maximum discount allowed by them to any distributor to be applied to their sales, to all their distnnuiors, or whether they sought acceptance of the discount allowed in each. case. Shri Jain stated that these were alternative arguments, and both should be considered. Finally, however, he submitted that I should endorse the view of the learned Technical ‘Member, which is that the discount actually allowed to each distributor should be admitted.
13. In support of his argument that the wholesale cash price at the place nearest to the factory should be adopted. Shri Jain referred to the Assistant Collector’s Second Order-in-Original dated 13.1.77. In para 5 of this order the learned Assistant Collector had held that the wholesale cash price under Section 4(a) was ascertainable at the place nearest to the place of manufacture, that is the zonal distributor’s place at Delhi. Shri Jain based himself on this observation of the Assistant Collector. The Assistant Collector went on to say that the price charged by the said zonal distributor to independent wholesale buyers would rightly constitute the basis of assessable value under Section ‘.'(a). Shri Jain wanted this part of the Assistant Collector’s order to be ignored.
14. It was pointed out to Shri Jain that the Assistant Collector’s observations would hardly constitute an authority by themselves. He did not further develop his argument.
15. As regards his argument that varying rates of discount could be allowed, Shri Jain quoted the following authorities :-
(a) Union of India v. Jyoti Ltd., Baroda, decided by the Gujarat High Court (1978 E.L.T. 238). In para 31 of this judgment the Hon’ble High Court had observed that “there is nothing to warrant that such trade discount is to be given only if it is uniformly given”.
(b) Gujarat State Fertilizers Co. Ltd., v. Union of India and Ors., decided by Gujrat High Court (1980 E.L.T. 397), He relied on paras 18 to 20 of this judgment, in which it had been observed (para 18) that “in the very nature of things, therefore, there is no warrant for implying that a trade discount would be a permissible deduction only if it is allowed uniformly”.
(c) Union of India and Ors. v. S.S.M. Bros. Pvt. Ltd., decided by Madras High Court 1986 (24) E.L.T.269. In para 4 of this judgment a reference has been made to “trade discount”. It has been observed that the Supreme Court in the case of Voltas Ltd. (1977 E.L.T.177) had held that trade discount need not be uniform and that even if the different rates of trade discount are allowed by the manufacturer, a deduction could be permitted in relation to such different rates of trade discounts if they are not determined on any extra-commercial considerations. (The learned advocate was asked whether he coult point out the particular paragraph in the Voltas judgment. He did not do so but contented himself by pointing out that this had been mentioned by the Hon’ble Madras High Court).
(d) Bramec Suri (P) Ltd. v. Collector of Central Excise, Kanpur, decided by the Tribunal 1985 (6) E.T.R. 132 Shri Jain referred to para 15 of the Tribunal’s order where the learned S.D.R. was recorded as having contended that for admissibility for abatement of duty, a discount should be allowed on uniform basis to all buyers. According to Shri Jain, the Tribunal’s decision in this case “did not take this submission into account”. Accordingly, the Tribunal should be taken as having rejected this submission.
(e) Malwa Vanaspati & Chemical Co. Ltd. v. Appellate Collector of Central Excise and Customs, New Delhi, decided by the Tribunal 1984 (17) E.L.T.395, In paras 2 and 3 of the Tribunal’s order reference had been made to the judgment dated 14/15 November, 1983 of the Hon’ble Supreme Court, clarifying certain points arising out of the Supreme Court’s main judgment in the case of Bombay Tyre International etc. (1983 E.L.T. 1896). It had been held by the Tribunal that for a reduction to qualify to be treated as a trade discount what was material was the established practice of the trade, and mere nomenclature was not material.
16. After referring to these authorities in favour of his submission that different trade discounts could be admitted, Shri .lain referred to the two authorities to the contrary cited in the orders of the two learned Members. He made the following submissions :-
(a) Shyam Glass Works v. Inspector of Central Excise, Sasni and Ors., decided by the Allahabad High Court (1979 E.L.T.460). No doubt in this case the Hon’ble Allahabad High Court had held that a discount would be admissible only if it was uniformly allowed. Shri Jain submitted that the Gujarat High Court in its judgment in the case of Gujarat State Fertilizer Co. [para 15(b) .above] had specifically disagreed with the above decision of the Allahabad High Court, and had inter alia observed that the Allahabad High Court had not given any reason for its conclusion.
(b) Standard Autoparts Private Ltd., Jodhpur v. Appellate Collector of Central Excise, New Delhi, decided by the Tribunal (Order No. 152/84-A dated 5.3.84 on Appeal No. E.2933/76-A). Shri Jain agreed that in this case the Tribunal had allowed only a single rate of discount, namely the minimum. He however contended that the facts of the case were not clear from the order. The quantum of sales at different prices was not known. It was also,not known whether a wholesale cash price was ascertainable. Further, the Bench had not given any authority in support of its view.
17. In conclusion Shri Jain submitted that the discount actually allowed to the 4 distributors should be admitted, as proposed by Member Shri Prakash Anand.
18. Shri Doiphode replied on behalf of the Collector. Among other things he sought to argue that the discount of 35.57% allowed to distributors in Delhi was based on extra-commercial considerations. In this connection he referred to a number of clauses in the agreement between the appellants and their distributors for the Delhi region. Shri Doiphode also sought to argue that the difference between the discount of 35.57% allowed to the Delhi distributors and 30.35% allowed to the Bombay and Calcutta distributors was due to differences in the agreements with the respective distributors. Since the agreements with the Bombay and Calcutta distributors are not on the record, this can only be termed a presumption by the learned S.D.R.
19. Apart from this, it was pointed out to Shri Doiphode that the admissibility of the discounts per se was not in issue. In the first place the Government of India, in pursuance of the review show-cause notice under Section 36(2), had clearly held that the distributors could not be regarded as favoured buyers. Secondly, neither of the two learned Members who earlier heard this appeal found any reason for objecting to the discounts per se. Shri Doiphode submitted that the review show-cause notice issued by Government was on the basis that assessment should be on the prices at which the distributors sold the goods to wholesale dealers. That was no the case of the Department before the Tribunal.
20. Shri Doiphode disputed the contention of Shri Jain that there was no wholesale market at the factory gate. He submitted that this was nowhere on the record. On the contrary, since all the goods were sold direct from the factory, there could be said to be a wholesale cash price at the factory gate. In this connection he referred to the judgment of the Supreme Court in the case of A.K. Roy and Anr. v. Voltas Limited (1977 E.L.T. 177). He referred to para 9 of this judgment wherein the Supreme Court had explained that a wholesale market does not always mean that there should be an actual place where articles are sold and bought on a wholesale basis.
21. Shri Doiphode then referred to the argument that there could be a multiplicity of admissible vlaues to different distributors. In this connection he contrasted Section 4 of the Central Excises and Salt Act as it stood at the relevant time with the same section after its amendment in 1973. Referring to ‘The Law of Central Excise”, Second Edition, by Taraporevala and Parekh, he quoted from the “Statement of Objects and Reasons” for the new Section 4, as appearing at pages 83-84 ibid. This statement says inter alia “In order to overcome the various difficulties experienced in the working of the section it is proposed to suitably revise the valuation provision contained in section 4 of the Act, providing, as far as practicable, for assessment of excisable goods at the transaction value, except in areas where there may be scope for manipulation (such as sales to or through related persons) and making specific stipulations with respect to situations frequently encountered in the sphere of valuation.” He argued that it was only the new Section 4 (enacted in 1973 and brought into force on 1.10.75) that accepted the plurality of assessable values. Prior to that, and therefore at the material time, there could only be a single assessable value under given conditions.
22. Shri Doiphode argued that the assessable value should not be related to the quantity of goods sold. In this connection he referred to para 20 of the judgment of the Supreme Court in the Voltas case (1977 E.L.T. 177) wherein it was held that the quantum of goods sold by a manufacturer on wholesale basis was entirely irrelevant.
23. Shri Doiphode referred to various judgments relied upon by Shri Jain in support of his contention that prices need not be uniform. He submitted that such observations were always subject to the qualification that the variation should not be due to extra-commercial considerations. According to him the higher discount allowed to the Delhi and Madras distributors could be deemed to be because of extra-commercial considerations.
24. Shri Doiphode referred to the Tribunal’s decision in the Standard Autoparts case [para 16(b) above]. In that case discounts varying from 20 to 32.5% were allowed by the manufacturers. The Tribunal held that manufacturers were entitled to the minimum of the discounts allowed. He submitted that the facts were similar to those in the present case and therefore the ratio of that order would apply to the present case.
25. Shri Doiphode then referred to the order of the Tribunal in the case of Premier Automobiles Ltd. v. Collector of Central Excise, Bombay 1985 (20) E.L.T. 156. There the question was whether payment for after-sales service could be regarded as a trade discount, and it was held that it could not. (This order does not appear to have much relevance to the present case).
26. Shri Doiphode then cited the order of the Tribunal in the case of Dharampur Leather Cloth Private Ltd., Gujarat v. Collector of Central Excise. Baroda, reported in 1986 (25) E.L.T. 445. In para 11 of this order the Tribunal, relying on a judgment of the Madras High Court (no reference given) observed that different prices charged to different customers could be accepted if they were based on rational commercial basis. However, in the case before the Tribunal it was held that the appellants had not been able to establish that the differentiation was on some rational commercial basis. On the same analogy in the present case there was no rational commercial basis for different discounts being allowed to different distributors. (This would conflict with Shri Doiphode’s submission that the difference was relatable to differences in the clauses of the respective agreements, dealing with the obligations of the distributors).
27. As regards the judgment of the Gujarat High Court in the case of Jyoti Limited relied upon by Shri Jain, Shri Doiphode referred, to para 31 of the judgment. He submitted that the discussion and decision were with reference to different prices charged for wholesale and retail transactions. That judgment would not have any relevance to this case.
28. Shri Doiphode submitted that Section 4 at the relevant time referred to the price at which the goods were sold or capable of being sold. The position was that the goods were simultaneously being sold to different distributors at different prices. It would follow that, irrespective of the price at which the goods were actually being sold to the Delhi and Madras distributors, they were capable of being sold at a higher price, as was. evidenced by the actual sales simultaneously made to the Bombay and Calcutta distributors. Since according to him multiplicity of assessable values was,not provided for under the erstwhile Section 4, the assessment should be on the basis of the highest price at which the goods were shown to be capable of being sold, namely the price charged to the Bombay and Calcutta distributors. He submitted that the point at issue should be decided accordingly.
29. In a brief reply, Shri Jain submitted that the question whether the sales to the distributors were or were not at arms length had already been concluded in favour of the appellants by the Government of India with reference to the review show-cause notice. The points now sought to be raised by Shri Doiphode with reference to the agreement with the distributors were therefore not relevant.
30.1 have carefully considered the orders recorded by the two learned Members and the submissions made before me by the learned representatives of both sides. As already mentioned, the two learned Members are agreed that the prices at which the goods were sold to M/s. Mico and Caltex were admissible for the purpose of assessment. That issue is therefore not before me.
31. Again, the question whether the discounts granted to the distributors were vitiated by any special relationship has been pronounced upon by the Government of India, in their order dated 5.5.1982, discharging the show-cause notice. It has also been raised by the two learned Members, who have implicitly held that the discounts were not so vitiated. The only .question is which rate of discount should be accepted, in a case where there are varying rates. In view of this it is not necessary to consider the arguments advanced by Shri Doiphode against the admissibility of the discounts, on the ground of extra-commercial considerations etc.
32. The main question for consideration is whether varying assessable value to different customers in one and the same class of buyers (distributors in this case) would be acceptable in terms of Section 4 at the material time. Though the questions posed tome refer to varying discounts, 1 would prefer to discuss them in terms of varying prices or varying assessable values, these case being what ultimately have to be decided. (Discounts, prices and values are of course inter-related).
33. A number of authorities in this regard have been cited. For the reasons which follow, it appears to me that none of these authorities, with the exception of the decision of the Tribunal in the Standard Autoparts case, squarely applies to a case like the present.
34. To put it differently, the question is whether the unamended Section 4 contemplates a single assessable value or permits the adoption of varying assessable values, the conditions remaining the same. It is important to note the qualification “conditions remaining the same”, which would preclude a blind insistence on a single assessable value. A manufacturer may have different prices for the same good, on the basis of specific commercial considerations. For. instance, he may say that the price of a single article would be X; the price of 10 articles would be Y (not 10X, but generally less); the price of 100 articles would be Z (less than 100X); and so on. This would mean that the price per article would be different, depending on whether one purchases one article, or 10, or 100, at one time, this need not be considered as a case of non-uniformity, or multiple assessable values. Non-uniformity would arise where, for instance, the price per article when offered to buyer A is P, whereas when offered to buyer B, all other conditions remaining the same, is 0.
35. Again, the question of uniformity can arise only when the buyers belong to the same class. If one price is charged to a distributor, another to a wholesale dealer and a third to a consumer, this cannot be said to be a case of non-uniformity: nor can it be expected that the prices to all three categories of buyers would be the same. Most of the authorities cited relate to this situation and not to a situation where all material conditions are the same, yet different prices are charged to different buyers.
36. Against this background, the various cases cited as permitting varying assessable values may be examined.
(a) Union of India v. Jyoti Ltd., decided by Gujarat High Court (1978 E.L.T. 238). The judgment is very detailed. Even so, some of the facts relevant to the present issue are not available. It is however clear that in this case the Excise authorities had taken an unsustainable position. On the ground that different discounts were given to different classes of buyers (and perhaps different buyers) they had totally denied any discount to the manufacturers. This was after the Central Government had decided the grant of 15% discount “so long as such or higher discount is actually being granted uniformly, on all the sales in wholesale lots” to the distributors, sub-dealers etc. by the sole-selling agents”. (This direction seems to have been misunderstood or misapplied by the lower Central Excise authorities). The emphasis in the judgment is on sales to wholesale dealers and distributors, where the discount given was 15%. It is also recorded that the manufacturers allowed 18-1/2% discount to their sole selling agents, who in turn allowed 15% discount to dealers and distributors: in regard to these sales the manufacturers claimed abatement of only. 15%. In the judgment, particularly para 31, the points made are that (1) it is the wholesale price that has to be determined for the purpose of levying excise duty and not the retail price; (2) trade discount is bound to vary, because of larger quantities being taken or for other reasons; (3) a 15% deduction had been given to wholesale dealers and that was the material factor to be taken into account for determining the wholesale cash price and consequently the assessable value. The final order of the High Court is to confirm the amounts awarded by the lower Court (except two which were barred by limitation). The judgment does not explain how this amount was arrived at, i.e. on the basis of what rate of discount. However, it would clearly be wrong to read this judgment as laying down that different discounts could be allowed in respect of sales made under the same conditions. On the contrary, if at all a presumption can be made, it is that the discount of 15%, representing the discount generally given to wholesale dealers, was ordered to be applied to all sales.
(b) Gujarat State Fertilizers Company Ltd., decided by Gujarat High Court (1980 E.L.T. 397). In this case the question was regarding different “regional discounts” granted to purchasers in different States. These different discounts were arrived at by the appellants having regard to the cost of transporting the fertilizers from Gujarat to their respective States and yet selling them within the statutory ceiling prices; and also taking into account competition in different States from other manufacturers situated closer to those States. Thus, different discounts were given to different sets of purchasers in different regions, on the basis of well-defined commercial considerations. The Excise authorities not only refused to recognise the differentiation, but denied the benefit of the regional discounts altogether. Understandably, this decision was reversed by the Gujarat High Court, which relied inter alia on the decision of the same High Court in the case of Jyoti Limited, although certain observations occur in the judgment to the effect that even if a trade discount varies from transaction to transaction, the wholesale cash price for each transaction has to be accepted, these observations should be read in the light of two important factories; namely, (a) the basic question before the High Court, namely differentiation between classes of buyers on well-defined commercial considerations; and (b) reliance on certain observations in the Supreme Court’s judgment in the case of Voltas Limited, to the effect that the real value has to be found only on the basis of manufacturing cost and manufacturing profit – a view subsequently modified by the Hon’ble Supreme Court in its judgment in the case of Bombay Tyre International 1983 (14) ELT 1896.
(c) Union of India and Ors. v. S.S.M. Bros. Pvt. Ltd. and Anr., decided by Madras High Court 1986 (24) E.L.T. 269. The facts in the above case appear to be different from those in the case before me.’ It appears that the manufacturers were allowing a trade discount of 4% plus a cash discount of 3%, and this was initially accepted by the Excise authorities. Subsequently however, the acceptance was withdrawn, on the ground that the discounts were not uniformly given. Although the facts are not quite clear, it appears that in some cases the discount was not allowed at the time of clearance, but allowed subsequently in the form of credit notes and it was on this basis that the Excise authorities took the view that the discount was not uniformly given. This objection was held by the High Court to be not justified. Obviously these facts and circumstances have no bearing on the present case. However, citing this judgment of the Madras High Court, the learned advocate for the appellants drew particular attention to the observations made therein regarding the observations of the Hon’ble Supreme Court in the case of Voltas Limited. The Supreme Court is said to have held in that case that the trade discount need not be uniform and that a deduction could be permitted in relation to different rates of trade discounts if they are not determined on any extra-commercial considerations. Although specifically requested, Shri Jain did not point out the specific passages in the Voltas judgment to the above effect. I have read the judgment (1977 E.L.T. 177) with care. It basically relates to the interpretation of the expression “wholesale cash price”. In para 18 it has been observed that if there is a special or favoured buyer to whom a specially low price is charged because of extra-commercial considerations, that price would not be the “wholesale cash price”. It has been further observed that the fact that the manufacturers sold 95% of their goods to consumers direct would not make the price of the wholesale sales of the rest of the articles any the less the “wholesale cash price”, provided these sales were at arms’ length and in the ordinary course of business. Thus, the Voltas judgment was concerned with the meaning of the expression “wholesale cash price” and stressed the distinction between sales to consumers and sales in wholesale trade. I have not been able to find in that judgment a pronouncement that varying prices on sales to the same class of buyers under the same conditions would be acceptable as the assesable value.
(d) Bramec Suri (Private) Ltd., decided by the Tribunal 1985 (6) E.T.R. 132. No doubt in para 15 of the order the S.D.R. is recorded as submitting that under Section 4, a deduction for trade discount is permissible only when allowed uniformly. It is also true that the Tribunal allowed the appeal, and did not specifically refer to the above submission of the S.D.R. This is however, much too slender a foundation to argue that the tribunal had negatived the above submission. The order refers to the lack of uniformity in the manner of preparing invoices. It does not indicate that the net prices were not uniform, or that such non-uniformity was found acceptable by the Bench.
(e) Malwa Vanaspati and Chemical Company Ltd., decided by the Tribunal 1984 (17) E.L.T. 393. This has been cited merely to stress that the nomenclature of a reduction is not material. I have not been able to see how this helps or even affects the appellants’s case.
37. The above analysis of the judgments relied upon by the appellants shows that none of them would support the specific proposition that different prices to the same class of consumers under the same conditions were acceptable in terms of the unamended Section 4. I shall now take up the cases cited against this proposition :-
(a) Shyam Glass Works v. Inspector of Central Excise, Sasni, decided by Allahabad High Court (1979 E.L.T. 460). In this case one rate of discount was allowed to buyers in Uttar Pradesh and another to buyers outside Uttar Pradesh. The brief judgment does not make it clear on what considerations the differentiation was based, and whether those could be considered as “extra-commercial”. The Allahabad High Court observed that the petitioner was clearly not entitled to the deduction of discount given to the customers in a manner which was not uniform. No specific authority from previous decisions was cited. This judgment was specifically referred to by the Gujarat High Court in its judgment in the case of Gujarat State Fertilizers Company Ltd. [para 36(b) above]. The Hon’ble Gujarat High Court expressed its disagreement with the view taken by the Hon’ble Allahabad High Court. It also observed that the Allahabad High Court had not given any reasons for reaching its conclusion, and that was sufficient to detract from the persuasive value of its decision.
(b) Standard Autoparts Ltd., Jodhpur, decided by the Tribunal (Order No. 152/84-A dated 5.4.1984). In this case the assessees manufactured roller bearings. On sales of these roller bearings they granted discounts ranging from 20 to 32.5%. The Bench did not distinguish between the different buyers, and took them as falling within the same class. It held that in those circumstances the minimum discount allowed, that is 20% should be accepted. Given the premises on which the Bench in that case proceeded, the ratio of that case would squarely apply to the present case.
(c) Dharampur Leather Cloth Co. Pvt. Ltd., decided by the Tribunal 1986 (25) E.L.T. 445. In this case the Tribunal had observed, following the Madras High Court, that different prices charged to different customers, if on a rational commercial basis and solely motivated by trade considerations, would be acceptable. (This is more or less what I have said earlier, with reference to sales “under the same conditions”). In the case before it the Tribunal held that the different prices were not shown to be on some rational commercial basis. It therefore, upheld the finding of the lower authorities that the assessment of all the goods should be on the basis of a single assessable value. This order also lends some support to the view that there should be a single assessable value under the same conditions.
38. It therefore appears to me that, from the authorities cited by both sides, the only ones which would apply to this case would be the judgment of the Allahabad judgment in the Shyam Glass Works case and more clearly, the Tribunal’s order in the Standard Autoparts case. On the basis of these precedents, the conclusion should be that in the present case only a sinle uniform assessable value on sales to the distributors should be accepted (as the difference in the discounts has not been shown to be related to specific commercial considerations).
39. While respectfully following the applicable precedents, I have also considered the question from first principles. It appears to me that there are good reasons in support of a single uniform assessable value (the qualification that it is for sales “under the same conditions” always being undertood).
40. Firstly, this would find support from the language of the section itself. The relevant part of this section read as under :-
“Where under this Act, any article is chargeable with duty at a rate dependant on the value of the articles, 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…”.
It will be seen that what constitutes the value is “the wholesale cash price”. It is not “any price” but “the price”. The use of the definite article “the” would, by common usage, indicate that the reference is to a single price and not to a multiplicity of prices, such as would have been implied if the wording had been “any wholesale cash price”. Again, in the alternative clause (b), the reference is to “the price”.
41. Secondly, and more important, acceptance of a multiplicity of assessable values under the same conditions would cut at the very basis of the Self Removal Procedure, which is set out in Chapter VIIA of the rules made under the Act. The core of the Self Removal Procedure is that an assessee can assess his goods himself, pay duty and remove them, on the basis of the value and rate of duty approved by the proper officer. Rule 173C provides for the filing of a price list and its approval by the proper officer “after making such modifications as he may consider necessary so as to bring the value shown in the said price list to be the correct value for the purpose of asasessment as provided oin section 4 of the Act” (emphasis has been added to stress the definite article and the singular number). Thereafter, in terms of Rule 173F, the assessee can remove his goods after paying duty on the basis of the approved classification and value. The whole rationale of the Self Removal Procedure is that there shall not be an enquiry or clearance at the time of every individual removal of goods. However, initially and whenever required thereafter, there has to be an approval by the proper officer of the rate of duty and value claimed by the assessee. There is also a post clearances check and assessment, on the basis of the R.T. 1.2 returns. The entire procedure of prior approval of a price list and subsequent clearances on the basis Of .self-assessment would become largely meaningless if it was open to an assessee to clear his consignments on the basis of varying assessable values, according to his wishes.
42. Sub-rule (11) of Rule 173G authorises the Collector, in a case where there are frequent fluctuations in the market – prices of goods, to allow an assessee or a class of assessees to declare the transaction value of each consignment and assess the goods on the basis of the transaction value. This is however an exceptional provisions. It is in the nature of the “exception which proves the rule”. The very fact that a specific exception has been made in the case of goods, whose value is subject to frequent fluctuations would go to show that in the normal course no such facility is available, and that a single price, as in the approved price list, would be applicable.
43. The Self Removal Procedure ohas been in force for nearly 20-years, and it was in force at the material time. It is incorporated in the statutory rules made under the Act. The practice based on such rules, which has been accepted and followed by the trade for so long, could certainly be considered as a legitimate aid for the interpretation of the Act: the more so since, if the interpretation put forward by the learned advocate for the appellants is accepted, the rules governing the Self Removal Procedure, and particularly Rule 173C, would lose much of their purpose.
44. Therefore, having regard to the precedents referred to in para 37, the wording of Section 4, and the Self Removal Procedure and the statutory rules on which it is based, I am of the view that for the same goods under the same conditions (which would include the same class of buyers) only one assessable value would be acceptable. It would thus follow that varying discounts, leading to varying assessable values, would not be acceptable. The first question raised for my consideration is answered accordingly.
45. As regards the second question, where the discounts vary, the actual discount in each transaction obviously cannot be accepted, in view of the answer to the first question. The choice, in terms of the second question, would, therefore, lie between the maximum discount and the minimum discount : which I would prefer to put as between the minimum net price and the maximum net price. Having regard to the precedent cited, namely the decision of the Tribunal in the Standard Autoparts case with which I am in respectful agreement, I would hold that in these circumstances what is admissible is the minimum discount, which would lead to the maximum net price.
46. Shri Jain faintly argued that the discount should be that at which the maximum values of sales took place. He did not cite any figures to show that the maximum volume of sales was where the maximum discount was given. Apart from this, it was pointed out to him that this would hardly be a practical basis of assessment. Normally, no one could be sure at the time of assessment which distributor would have the maximum offtake within a particular period of a year or so. Thus, adoption of his suggestion would involve making of assessments over a period of time provisionally. Such a laborious alternative, involving uncertainty both to the assessee and to the Revenue, had nothing to commend it. The same would apply if the discount were to be calculated on a weighted average basis. These alternatives do not arise for consideration, in view of the precedent in the Standard Autoparts case, but have been referred to, in order to complete the discussion.
47. Shri Doiphode had sought to contrast the effect of Section 4 before amendment with Section 4 after its amendment in 1973 (effective from 1.10.1975) by referring to the “Statement of Objects and Reasons” (vide para 21 above). As explained above, I am of the view that the wording of the Section prior to amendment contemplated a single value. As regards the position after amendment, I am not called upon to express an opinion. I would like however to say that 1 do not necessarily agree with Shri Doiphode that as a result of the amendment different “transaction values” for buyers within the same class became acceptable.
48. In the result, my decision on the points referred to me by the two learned Members is as under :-
(1) and (2) : On the basis of the facts and circumstances on record, the highest assessable value, corresponding to the minimum discount, would repesent the assessable value of the goods sold to all k distributors, irrespective of the actual discount allowed in each case.
49. The case should now to back to the original Bench for final disposal in terms of the above decision.
Sd/-
New Delhi, (S. Venkatesan) 25th September, 1986. President Final Order
In accordance with the view of the majority, the instant appeal is allowed partly only in regard to the assessable values of the goods manufactured for others like M/s. Mico. That value will have to be the price at which the goods are sold to the brand name owners and not the price at which they themselves sell them to their customers.
The Appeal in so far it relates to varying discounts allowed on normal commercial considerations to different customers in one and the same class of buyers, is dismissed. It is held that it is only the minimum of such discounts that is to be excluded in the computation of the assessable value, thus confirming the order of the Appellate Collector in this regard.