PETITIONER:
SESHASAYEE PAPER & BOARDS LIMITED, ERODE
Vs.
RESPONDENT:
COLLECTOR OF CENTRAL EXCISE, COIMBATORE
DATE OF JUDGMENT13/02/1990
BENCH:
KANIA, M.H.
BENCH:
KANIA, M.H.
VERMA, JAGDISH SARAN (J)
CITATION:
1990 AIR 974 1990 SCR (1) 320
1990 SCC (2) 146 JT 1990 (1) 197
1990 SCALE (1)164
ACT:
Central Excises and Salt Act, 1944/Central Excise Rules,
1944: Section 4 and First Schedule Tariff Item No.
17--Excise duty--Levy of--Paper and paper boards manufac-
tured by assessee--'Trade discount' and 'service charge
discount'--Permissibility.
HEADNOTE:
The appellant who was engaged in the manufacture of
paper and paper boards which were assessable under Tariff
Item No. 17 of the First Schedule to the Central Excises and
Salt Act. 1944. engaged several dealers referred to as
Indentors, with a view to promote its sales. In the fixation
of the normal price of these items under section 4 of the
Act for the purpose of levy of excise duty, the appellant
claimed deduction on account of 'service charge discount'
paid to the Indentors, in addition to the 'trade discount'
paid to the purchasers.
Having failed before the assessing authority and the
Central Excise and Gold (Control) Appellate Tribunal in
respect of the deduction claimed on account of 'service
charge discount' the appellant appealed to this court.
It was contended on behalf of the appellant that al-
though in some of the sales the discount allowed to the
Indentors might have been described as 'service charges
discount', that name could not govern the real nature of the
transaction and the discount was really a 'trade discount'.
It was further contended that in several cases the indentors
were really the purchasers themselves and hence, the normal
trade discount paid to them should have been allowed as a
deduction.
Dismissing the appeal, this Court,
HELD: (1) The trade discount was discount paid to the
purchaser in accordance with the normal practice of the
trade. 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
321
trade discount qualifying for deduction. [323B-C]
Union of India & Ors. v. Bombay Tyres International
Pvt. Ltd., [1984] 17 E.L.T. 329 (S.C.) and Coromandel Ferti-
lizers Limited v. Union of India & Ors., [1984] 17 E.L.T.
607 (S.C.), referred to,
(2) If in any case the purchaser named in the invoice
18 the same as the Indentor, normal trade discount given to
the Indentor will be allowed as a deduction in the determi-
nation of the normal price for the levy of the excise duty
subject to other relevant considerations. [324B-C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 32 17 of
1988.
From the Judgment and Order dated 30.5.88 of the Cus-
toms Excise and Gold (Control) Appellate Tribunal, New Delhi
in E/Misc/ 194/87-A & E/A No. 1365/85-A & Order No. 308/88-
A.
Gauri Shankar, Mrs. H. Wahi, Manoj Arora and S. Rajjappa
for the Appellant.
Soli J. Sorabjee, Attorney General, V.C. Mahajan, R.P.
Srivastava and P. Parmeshwaran for the Respondent.
The Judgment of the Court was delivered by
KANIA, J. This is an appeal preferred by the appellant
(assessee) from a judgment of the Central Excise and Gold
(Control) Appellate Tribunal, New Delhi (hereinafter re-
ferred to as “the said Tribunal”].
As the controversy before us is an extremely limited
one, we propose to set out only the facts necessary for
appreciating that controversy.
The appellant is a public limited company engaged inter
alia in the manufacture of paper and paper boards 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
322
paper boards 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 subsection (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 or 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 paper boards manufactured by the appel-
lant 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 usual agreements
entered into by the appellant with its dealers has been
taken on record. The opening part of the said agreement
shows that the appellant is referred to in the agreement as
the company and the contracting dealer is referred to as the
Indentor. We propose to refer to the dealers engaged by the
appellant to promote the sales of its products as “Inden-
tors” for the sake of convenience. Clause (3) of the agree-
ment shows that the Indentor agreed to purchase in his own
name or procure acceptable indents from third parties for
paper and paper boards manufactured by the company would be
of such quantities and varieties as set out in the Schedule
A to the agreement. The Indentors agreed to deposit with the
company a certain amount of money as security. Clause (8) of
the agreement shows that the Indentors held themselves
responsible for the immediate clearance of the documents
relating to the supply of paper on presentation by the
bankers and that all bank charges other than discounting
charges would be on the consignee’s account.
It is common ground that in the invoices in respect of
the paper and paper boards supplied and sold pursuant to the
aforesaid agreement with the Indentors, in most cases the
name of the dealer concerned was shown as the Indentor and
the names of the parties to whom the goods were to be deliv-
ered were shown as the purchasers but in some cases the
Indentors were themselves shown as 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
323
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 set-
tled 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 (Coromandel Ferti-
lizers 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 dis-
count given to them has been allowed as a deduction. More-
over, 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 that the normal trade discount may
be allowed in those cases where the Indentor is also shown
as the purchaser in the concerned invoice. It is, however,
submitted by learned counsel for the appellant that although
in some of the cases the Indentor might not be shown as the
purchaser and the purchaser shown is the different party,
yet the real nature of the transaction was that the Indentor
purchased the goods referred to in the said invoice and in
turn sold it to a customer whose name was shown as the
purchaser in the invoice for the sake of convenience so that
the delivery could be directly effected to him. We are of
the view that it is not open to the appellant to raise this
contention at this stage. No case has ever been made out
right upto the Tribunal and even before the Tribunal that in
respect of any particular invoice although the name of the
purchaser was other than that of the Indentor, it was really
the Indentor who was the purchaser and he in turn has sold
the goods to the third party whose name was shown as
324
purchaser or even that the Indentor had entered into the
transaction as the agent of the purchaser. If such a conten-
tion had been raised, the factual position could have been
examined and different considerations might have been ap-
plied. But it is certainly not open to the appellant to
raise this contention at this stage, in this appeal, partic-
ularly keeping in mind that the Tribunal is the final fact-
finding authority. No other contention has been raised
before us.
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 deduc-
tion in the determination of the normal price for the levy
of excise duty subject to other relevant considerations.
In the result, the appeal fails and is dismissed, save
to the extent of the aforesaid clarification. The appellant
to pay the costs of the appeal to the respondent.
R.S.S. Appeal dis-
missed.
325