C.N.B. Nair, Member (T)
1. The dispute is with regard to the valuation of ice cream manufactured by the appellants. They classify their wholesale dealers into different zones. They have also a system of varying discounts, which they extend based on the quantity of purchase. In respect of zone one (Delhi), their purchasers are Kwality Food and Ice Cream Ltd. and Kwality Restaurant and Ice Cream. To both these buyers, they gave a discount of 35% as against the varying discount of 10% to 25% given to buyers of other zones. The impugned orders disallowed the discount allowed to the two dealers of Delhi, holding that they are related to the manufacturer and that is the reason for granting them a higher discount. Accordingly, the discount for the purpose of assessment was limited to the lowest percentage i.e. 10% only. The learned counsel representing the appellants submits that there is no legal basis for restricting the discount to 10% in respect of sales to the two Delhi buyers. He refers to the finding in the impugned orders that the appellants were granting discount of 25% in respect of dealers who were admitted to be not related to them. The learned counsel, therefore, submits that the Revenue authorities should have allowed discount of 25% at least in respect of sales to Kwality Food and Ice Cream and Kwality Restaurant and Ice Cream also, particularly since, admittedly, they were the biggest buyers of the appellants’ products (lifting 27% and 36% of their products respectively).
2. The second issue raised in the appeal is the security deposit taken by the appellant from the wholesale dealers of their ice cream to whom they have supplied deep freezer cabinets. The impugned order has held that the security deposit taken by the appellants confers an advantage on the appellants and is, therefore, to be assessed to excise duty. He has relied on the decision of the Hon’ble Supreme Court in the case of Metal Box India Ltd. reported in 1995 (75) E.L.T. 449. The learned counsel submits that the Appellate Commissioner was clearly in error in holding that the appellants derive any benefit in their ice cream sales from the supply of deep freezers to the dealers and taking a security deposit for the same, inasmuch as their business of manufacturing ice cream and selling the same to the wholesale dealers is a separate activity from the supply of deep freezer and taking security deposit for the same. He, therefore, submitted that the decision of the apex Court in the Metal Box India Ltd. case has no relevance in the present case. He also submitted that the Revenue authorities had not shown by any evidence that the appellants were recovering any amount, which could be attributable to the sale consideration for the ice cream through the route of security deposit.
3. We have heard the learned Departmental Representative. He agrees that there was no justification for denying the discount of 25%, which was given to unrelated buyers.
4. In the undisputed facts of this case, the appellants were giving quantity discount ranging up to 25% to admittedly unrelated dealers. The appellants’ two wholesale dealers at Delhi, Kwality Food and Ice Cream Ltd. and Kwality Restaurant and Ice Cream, are their biggest buyers accounting for purchase of 60% of their products. There was, therefore, no justification for denying the highest discount of 25% allowed to unrelated buyers in respect of sales to these two dealers also. We, therefore, hold that the discount at 25% should be allowed in respect of sales made to Kwality Food and Ice Cream Ltd. and Kwality Restaurant and Ice Cream also while assessing the ice cream sold to them to duty. The supply of deep freezers and taking a security deposit for that supply has not, in any way, been shown to be used as a route for recovering any additional amount towards the price of ice cream. Therefore, we find no justification for subjecting this security deposit to excise duty. The appeal, therefore, succeeds on this count and no duty could be demanded on account of security deposit.
5. The appeal is allowed to the extent indicated above.