{"id":155005,"date":"1986-09-30T00:00:00","date_gmt":"1986-09-29T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/auto-lamps-limited-vs-collector-of-central-excise-on-30-september-1986-2"},"modified":"2017-02-05T07:15:00","modified_gmt":"2017-02-05T01:45:00","slug":"auto-lamps-limited-vs-collector-of-central-excise-on-30-september-1986-2","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/auto-lamps-limited-vs-collector-of-central-excise-on-30-september-1986-2","title":{"rendered":"Auto Lamps Limited vs Collector Of Central Excise on 30 September, 1986"},"content":{"rendered":"
Customs, Excise and Gold Tribunal – Delhi<\/div>\n
Auto Lamps Limited vs Collector Of Central Excise on 30 September, 1986<\/div>\n
Equivalent citations: 1986 (10) ECC 170, 1986 ECR 585 Tri Delhi, 1987 (29) ELT 889 Tri Del<\/div>\n<\/p>\n
<\/pre>\n
ORDER<\/p>\n
 S. Venkatesan, President <\/p>\n
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,<\/p>\n
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.\n<\/p>\n
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”).\n<\/p>\n
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).\n<\/p>\n
5.  Some material dates in regard to the case are set out below :-\n<\/p>\n
  28.12.72    Price list No. 4\/72 filed, claiming trade discount of 35.57%.\n23.9.73     Price  list  No.  1\/73  submitted,  claiming  trade  discount\n            of 36%.\n13.11.75    First Order-in-Original passed by Assistant Collector, \n            directing cancellation of price list No. 1\/73 and approving \n            a discount of 20% for goods covered by both price lists.\n13.8.76     First  Order-in-Appeal  passed  by  Appellate Collector, \n            setting aside  the Assistant Collector's order and direc-\n            ting a de novo decision.\n13.1.77     Second  Order-in-original  passed  by  Assistant  Collector, \n            approving  a  discount  of  20%  +  5%  in  respect  of  the \n            above two price lists (among others).\n14.2.78.    Second  Order-in-Appeal  passed  by  Appellate  Collector,\n            to the following effect :-\n            (a) order of Assistant Collector quashed;\n            (b) assessable  values  directed  to  be  determined  on  the \n            following basis:-\n              (i) for sales to distributors, minimum discount allowed by\n              manufacturers to be accepted ;\n              (ii) for sales to M\/s. Mico and Caltex, assessment \n              to be on prices charged by them to wholesale \n              dealers after deducting the discount allowed by them.\n7.8.78      Appellants  filed  the Revision  Application  which  is  now\n            before the Tribunal.\n12.8.78     Show-cause notice in pursuance of Second Order-in-Appeal issued,      \n            alleging short-levy  or  Rs. 75,511  + Rs. 8,647.51.\n31.1.79     Show-cause  notice issued  by Government  of India under Section  \n            36(2), proposing  to  revise  the  Second  Order-in-Appeal on  \n            the ground  that the distributors  were favoured  buyers  and            \n            the  discount  allowed  to  them  was not admissible.\n20.11.81    Third Order-in-original passed by Assistant Collector, confirming the \n            demand proposed in the show-cause notice dated 12.8.78.\n5.5.82      Review  proceedings  dropped  by  Government,  accepting\n            the submission  of  the  appellants  that  the  distributors \n            could not be regarded as favoured buyers.\n17.12.83    Third Order-in-Appeal passed by Collector (Appeals), \n            New Delhi, setting aside the Third Order-in-original \n            and directing the case to be decided afresh by disclosing \n            the evidence on which the demand was based. (We \n            were informed that no further order has been passed at \n            the level of the Assistant Collector).\n\n \n\n<\/pre>\n
[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.]<\/p>\n
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.\n<\/p>\n
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.]<\/p>\n
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 :-\n<\/p>\n
(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;\n<\/p>\n
(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?\n<\/p>\n
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.\n<\/p>\n
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).\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
15. As regards his argument that varying rates of discount could be allowed, Shri Jain quoted the following authorities :-\n<\/p>\n
(a) Union of India v. Jyoti  Ltd., Baroda,<\/a> 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”.\n<\/p>\n
(b) Gujarat State  Fertilizers  Co.  Ltd., v.  Union  of India and  Ors.,<\/a> 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”.\n<\/p>\n
(c) Union  of  India  and  Ors.  v.  S.S.M.  Bros.  Pvt.  Ltd.,<\/a>  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).\n<\/p>\n
(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.\n<\/p>\n
(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.\n<\/p>\n
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 :-\n<\/p>\n
(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.\n<\/p>\n
(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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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<\/a> (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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
25. Shri  Doiphode  then  referred  to  the  order of the Tribunal in the case of Premier Automobiles Ltd. v. Collector of Central Excise, Bombay<\/a> 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).\n<\/p>\n
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).\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.<\/p>\n
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).\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
36. Against  this  background,  the  various  cases  cited  as  permitting varying assessable values may be examined.\n<\/p>\n
(a) Union of India v. Jyoti Ltd.,<\/a> 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.\n<\/p>\n
(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.\n<\/p>\n
(c) Union of India and Ors.  v. S.S.M. Bros. Pvt.  Ltd.  and Anr.,<\/a> 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.\n<\/p>\n
(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.\n<\/p>\n
(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.\n<\/p>\n
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 :-\n<\/p>\n
(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.\n<\/p>\n
(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.\n<\/p>\n
(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.\n<\/p>\n
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).\n<\/p>\n
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).\n<\/p>\n
40. Firstly, this  would find support from  the  language of the section itself. The relevant part of this section read as under :-\n<\/p>\n
“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 –\n<\/p>\n
 (a) the  wholesale  cash  price  for  which  an  article  of  the  like  kind and quality is sold or is capable of being sold…”.\n<\/p>\n
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”.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
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.\n<\/p>\n
48. In  the  result,  my  decision on  the  points  referred  to me  by  the two learned Members is as under :-\n<\/p>\n
 (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.\n<\/p>\n
49. The case should now to back to the original Bench for final disposal in terms of the above decision.\n<\/p>\n
                                                                     Sd\/-\n<\/p>\n
New Delhi,                                                   (S. Venkatesan)\n25th September, 1986.                                           President\n\n \n\nFinal Order\n \n\n<\/pre>\n
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.\n<\/p>\n
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.<\/p>\n","protected":false},"excerpt":{"rendered":"
Customs, Excise and Gold Tribunal – Delhi Auto Lamps Limited vs Collector Of Central Excise on 30 September, 1986 Equivalent citations: 1986 (10) ECC 170, 1986 ECR 585 Tri Delhi, 1987 (29) ELT 889 Tri Del ORDER S. Venkatesan, President 1. This appeal was heard by Special Bench A, consisting of Members Shri M. Gouri […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[41,33],"tags":[],"class_list":["post-155005","post","type-post","status-publish","format-standard","hentry","category-customs-excise-and-gold-tribunal-delhi","category-tribunal"],"yoast_head":"\nAuto Lamps Limited vs Collector Of Central Excise on 30 September, 1986 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/auto-lamps-limited-vs-collector-of-central-excise-on-30-september-1986-2\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Auto Lamps Limited vs Collector Of Central Excise on 30 September, 1986 - 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