Customs, Excise and Gold Tribunal - Delhi
India Paper Pulp vs Collector Of Central Excise on 31 March, 1993
Equivalent citations: 1993ECR385(TRI.-DELHI), 1994(72)ELT158(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. By this common order, three appeals, being Appeals No. E/4165/89-A, No. E/113/90-A and No. E/114/90-A, filed by M/s. India Paper Pulp, are being disposed of, as all these three appeals deal with identical matters, and arise out of a single Order passed by the Collector of Central Excise (Appeals), Calcutta.
2. M/s. India Paper Pulp (Management : West Bengal Industrial Development Corporation Ltd.), Hazi Nagar, 24-Parganas, West Bengal, the appellants, have filed these three appeals against the Order-in-Appeal No. 163-165/Cal-II/RA/89, dated 27-7-1989 passed by the Collector of Central Excise (Appeals), Calcutta.
3. The appellants were engaged in the manufacture of paper and paper board. In the course of manufacture of paper, a bye-product known as Magnesium Lignosulphonate (trade name - Celex sulphite Lye), classifiable under Heading No. 3804.00 of the Schedule to the Central Excise Tariff Act, 1985 (the "Tariff") emerged.
4. The appellants filed their price list No. I/IPP/87, dated 25-4-1987 in Part I effective from 1-5-1987, and declared their value as Rs. 2400/- per MT. Under columns 7 and 8 of the price list, it was indicated - "quantity discount admissible as per proposed price list except otherwise agreed upon". As per remarks in the price list, the discount pattern was shown in the price list enclosed therewith.
5. Under their circular No. IPP/CX/87-88/1, dated 10-4-1987 the discount pattern on monthly off-take basis, effective from Ist May, 1987, had been given as under :--
"25 MT and above/month Rs. 25/- per M.T. 50 MT and above/month Rs. 50/- per M.T. 75 MT and above/month Rs. 75/- per M.T. 100 MT and above/month Rs. 100/- per M.T. 125 MT and above/month Rs. 125/- per M.T. 150 MT and above/month Rs. 150/- per M.T. 175 MT and above/month Rs. 175/- per M.T. 200 MT and above/month Rs. 200/- per M.T. 225 MT and above/month Rs. 225/- per M.T. 250 MT and above/month Rs. 250/- per M.T. 275 MT and above/month Rs. 275/- per M.T. 300 MT and above/month Rs. 300/- per M.T."
6. Discount was payable on quarterly basis by way of credit note as per actual monthly off-take of previous quarter.
7. A customer had to buy a minimum of 25 MT of the product for reduction of Rs. 25/- per MT. Similarly, depending on the quantity purchased by a customer in a month different amounts of discount were afforded, the highest being Rs. 300/- per MT in case of a customer buying 300 MT or above of the said product in a particular month.
8. The appellants requested their customers to signify their acceptance of the revised selling prices to ensure continued and uninterrupted supply of material to them.
9. As per terms and conditions, Central Excise duty leviable on Celex under heading No. 3804.00 of the Tariff was fully refundable under Modvat scheme.
10. This price list was approved by the Divisional Assistant Collector, Central Excise on 27-4-1988.
11. Under letter No. RGRR/130/071, dated 17-6-1987, M/s. Orissa Cement Ltd. wrote to the appellants with reference to their circular dated 10-4-1987 as under :--
"That the basic rate of sulphite lye per tonne @ Rs. 2400/- (Rupees Two Thousand Four Hundred only) per tonne is acceptable to us.
2. That, since our off-take per month will be around 300 tonnes, we accept a firm price of Rs. 2100/- per tonne considering discount @ Rs. 300/- per tonne.
3. That, this firm price is essential to avoid higher payment of Excise duty and C.S.T."
12. Vide letter No. CL/400/1, dated 7-7-1987 M/s. Orissa Cement Ltd., referring to their earlier letter dated 17-6-1987, again wrote to the appellants as under:-
"...Whatever the quantity you will be supplying from Ist May, 1987 to 30th April, 1988, you will be paid for the same @ Rs. 2100/- per tonne as mentioned in our above said letter."
13. Tata Refractories Ltd. Belpahar (Orissa) also wrote on 6-7-1987 as under :--
"1. We hereby agree to accept your revised price of Rs. 2400/- per MT. From Rs. 1990/- per MT. For Naihati.
2. The less discount will be allowed @ Rs. 225/- per MT. on monthly off-take basis of 225 MT For Naihati.
3. The above revised price of Rs. 2400/- per MT. for Naihati and the less discount of Rs. 225/- per MT. will be applicable for quantity supplied on or after Ist May, 1987.
4. Quantity increased by another 1350 MT. for supply of Celex Sulphite Lye, thus making total quantity to 2050 MT. on order."
14. Bharat Refractories Ltd. (a Government of India Enterprise) Newai, Durg (MP) also filed their Purchase Order on 27-7-1987 for a quantity of 1600 MT @ Rs. 2275/- per MT.
15. The appellants filed price list No. 3/IPP/87-88, dated 10-7-1987 effective from 10-7-1987 in Part II for Orissa Cement Ltd. at assessable value of Rs. 2100/- per MT. The contractual price of Rs. 2100/- per MT after allowing the quantity/trade discount of Rs. 300/- per MT was shown in the price list. The relevant contract Order from Orissa Cement was also enclosed with the price list.
16. The price list in respect of supplies to Tata Refractories was filed under No. 4/IPP/87-88 on 20-7-1987 effective from 20-7-1987 also in Part II at assessable value of Rs. 2175/- per MT. Here also, the relevant amendment to the contract Order from Tata Refractories was filed with the price list.
17. Price List No. 5/IPP/87-88, dated 8-8-1987 effective from 8-8-1987 for supplies to the Government of India enterprise - Bharat Refractories Ltd. with assessable value of Rs. 2275/- per MT. alongwith a copy of the contract Order was also filed in Part II.18. All these three price lists in Part II mentioning and claiming approval of assessable values at Rs. 2100/-, Rs. 2175/- and Rs. 2275/- per MT. respectively, were approved by the Range Superintendent, Central Excise.
19. The Collector, Central Excise, Calcutta-II vide Order dated 3-5-1989 issued in exercise of the powers conferred upon him under Section 35E(2) of the Central Excises and Salt Act, 1944 (the Act) considered that the orders of price approval on the aforesaid 3 price lists did not appear to be legal and correction the grounds that (1) the contract was conditional; (2) the assessee did not provide the Department with relevant documents from which it could be established that such quantity off-take on which the contract and price thereof were dependent, had been supplied and (3) the incentive/rebate of price based on quantity off-take could not be termed as trade discount.
20. The Collector, Central Excise (Appeals), Calcutta vide his Order-in-Appeal No. 163-165/Cal-n/RA/89, dated 27-7-1989 set aside the approval given by the Superintendent Central Excise to the three price lists. Accepting the application filed by the Department he approved the assessable value @ Rs. 2400/- per MT. He stated that in that case the amount of rebate was not ascertainable nor could be known either to the India Paper Pulp or to their customers at the time of removal of goods from the factory.
21. The Collector, Central Excise (Appeals) also observed that (1) the party should have declared the full price of Rs. 2400/- per MT. in their price list indicating the amount of rebate they proposed to give which was not done; (2) the Superintendent approved the price lists in haste without applying his mind properly.
22. In appeal, the appellants invited attention to their circular dated 10-4-1987, and stated that the Collector (Appeals) had failed to note their said Circular, contract of different industrial consumers indicating the monthly 19/721 off-take of celex lye, trade discount allowed in the gate passes issued for each clearance of celex lye for sale and delivery to the buyers and approval of the price list No. 1/IPP/87, dated 25-4-1987 by the Assistant Collector, Barrackpur Division after considering the discount, to be admissible to the intending buyers/consumers as envisaged in their Circular dated 10-4-1987, referred to above. They also submitted that the Collector (Appeals) did not consider the facts that not only the buyers were fully aware of the discount to be admissible in case of lifting the required quantity of celex lye in every month but also made contracts for that purpose. Further, the discount (quantitative discount) was actually allowed/granted for each clearance of celex lye for sale to the different buyers from their factory as could be evident from the gate passes issued by them.
23. They relied upon the Supreme Court decision in the case - Union of India v. Bombay Tyre International 1984 (17) E.L.T. 329 (SC).
24. They referred that the expression "Allowance and the nature of the discount being known at or prior to the removal of the goods" in the above judgment by the Hon'ble Supreme Court were very significant. In their case, the industrial buyers viz. Orissa Cement Ltd., Tata Refractories Ltd. and Bharat Refractories were fully aware of the terms and conditions and nature of trade discount (quantitative discount) before entering into contracts for purchase of Celex Lye. The contractual prices were fixed based on monthly off-take as intimated by the individual buyers through letters and contract. The duty of excise was, therefore, paid on the contractual price which was fixed after allowing the trade discount based on monthly off-take.
25. They contended that their case was distinct from that of Modi Rayon and Silk Mills 1987 (29) E.L.T. 933 (Tribunal). The issue posed before the CEGAT in that case was whether "selling expenses" such as salary and wages, Advertisement expenses, Bank Charges, Business Promotion expenses, Travelling Expenses, Commission to Selling Agents, Brokerage to Selling Agents, Incentive to customers and rebate to customer, could be considered as trade discount under Section 4 of the Act for determination of the assessable value.-The Tribunal had observed in that case that the admissibility of trade discount (quantitative discount) per se was not a matter of controversy even prior to the judgment of Supreme Court in the Voltas case. Even the old Section 4 of the Act specifically referred to the trade discount as an admissible deduction. The Tribunal added that the appellants - Modi Rayon and Silk Mills had based their case on the "Selling Expenses" because they thought that that could be pressed for in the light of the Voltas judgment. In reply to the Assistant Collector's Show Cause Notice, the said Modi Rayon and Silk Mills shifted the emphasis from trade discount, to "selling expenses". The Tribunal, therefore, in that case concluded that the concept of "selling expenses" was different from that of trade discount.
26. They submitted that the facts in their case were different, and at no stage they had called the quantitative discount as their selling expenses, or vice versa.
27. The case was heard on 29-12-1992 when Shri Bhaskar Gupta, Senior Advocate and Shri A. Dev, Advocate appeared for the appellants. Shri M.N. Dhar, learned JDR represented the respondents.
28. Shri Bhaskar Gupta, the learned Senior Advocate mentioned that the quantity discount allowed by them was in the nature of trade discount. This quantitative discount which was in the nature of trade discount has been disallowed by the Department. He referred that their original price of Celex Lye was Rs. 1990/- per MT. With effect from 1-5-1987, they revised their base price to Rs. 2400/- per MT., subject to certain quantitative discounts. He referred to their Circular letter dated 10-4-1987 which had been sent to their customer and also referred to the letters received from their customers in response to that circular letter dated 10-4-1987. The customers had placed firm orders for the quantities which made them eligible for the quantity discount as offered by the producers under their circular letter referred to above. The appellants filed their price lists in Part-II of the price list proforma. Copies of the contracts had also been submitted alongwith those price lists.
29. The learned Senior Advocate mentioned that the Superintendent, Central Excise had allowed the discounts. The three price lists related to 3 buyers, and each of them was a separate class of buyers. Bharat Refractories was a Government of India Enterprise, and the appellants themselves were under the management of the West Bengal Industrial Development Corporation.
30. Shri Bhaskar Gupta, the learned Senior Advocate relied upon the following citations in support of his arguments :--
1. 1984 (17) E.L.T. 329 (SC) - U.O.I. and Ors. v. Bombay Tyre International;
2. 1989 (44) E.L.T. 552 (Tribunal) - Collector, Central Excise v. Muzaffarnagar Steels;
3. 1991 (54) E.L.T. 308 (Tribunal) - Safari Industries (I) Pvt. Ltd. v. Collector, Central Excise;
4. 1991 (56) E.L.T. 645 (Tribunal) - Collector, Central Excise v. Dewarance Macnell & Co. Ltd.;
5. 1992 (59) E.L.T. 23 (Madras) - Rathna Fire Works Factory v. Superintendent of Central Excise;
6. 1992 (60) E.L.T. 624 (Tribunal) - Sandoz India Ltd. v. Collector of Central Excise.
31. Shri M.N. Dhar, the learned J.D.R. referred to the price lists and stated that the appellants did not mention of the discounts therein. There was an element of conditionality in the offer of the discounts and the acceptance of the terms and conditions by the customers. There was nothing to indicate in the price lists that if the customers did not buy the specified quantities and thus did not satisfy the eligibility criteria then how the discounts were to be adjusted. The quantum of the goods cleared in future was not known. No normal price has been declared in the price lists.
32. He referred to the following citations in support of the points made by him:--
(1) 1982 (10) E.L.T. 506 (GOI) - Dharamsi Morarji Chemical Company Ltd., Maharashtra; (2) 1987 (27) E.L.T. 323 (Tribunal) - Kerala State Detergents and Chemicals Ltd. v. Collector Central Excise, Cochin; (3) 1987 (29) E.L.T. 933 (Tribunal) - Modi Rayon and Silk Mills v. Collector of Central Excise, Meerut.
33. In reply, Shri Bhaskar Gupta, learned Senior Advocate referred to Rule 173C of the Central Excise Rules, 1944 (the 'Rules') and stated that in respect of all the 3 parties firm prices were mentioned and that in view of this only discounted net prices were mentioned in the price lists which were filed in Part-II of the price list proforma, relating to contract prices.
34. We have considered the arguments advanced on both the sides.
35. We find in the case before us that the discounts based on monthly off-take basis have been built in the price structure, and a net discounted price has been contracted. Sales are from the factory directly to the customers. The net discounted price is charged at the time of removal of the goods from the factory. Actual prices charged at the time of the clearance were declared and got approved from the Department. There was no escalation or price variation clause in the contract. The payments were final. There is no allegation of any flow back of money from the customers to the manufacturer. Assessments were not provisional.
36. Price lists were filed in Part-II of the price list proforma. A copy of the written contract was filed with each price list, and the same was verified by the concerned Central Excise Officer. The goods were supplied to the unrelated buyers. In one case the buyer was a Government of India Enterprise. The manufacturers themselves were under the management of West Bengal Industrial Development Corporation Ltd. We do not find anything to show that any relevant information has been withheld from the department.
37. At this stage, we may refer to the observations made by the Hon'ble Supreme Court with regard to trade discounts in their decision in the case -Union of India and Ors. v. Bombay Tyre International Pvt. Ltd. 1984 (17) E.L.T. 329 (SC). The Hon'ble Supreme Court had observed that discounts allowed in the trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreement or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. They held that such trade discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price.
38. In the case - Moped India Ltd. v. Assistant Collector, Central Excise, Nellore and Ors. 1986 (23) E.L.T. 8 (SC) the Hon'ble Supreme Court had observed that the label given by the parties cannot be determinative because it is for the Court to decide whether the amount is trade discount or not, whatever be the name given to it.
39. In the case - Collector, Central Excise v. Indian Oxygen Ltd. 1988 (36) E.L.T. 730 (SC) the Hon'ble Supreme Court while dealing with the different prices of gases had observed that the proviso to Section 4 of the Act postulates that where in accordance with normal practice, the gases are sold to different classes of buyers then different prices may be charged. They added that if gases had been sold to different classes of buyers at different rates, it is possible that there might be different markets for the same.
40. Relying upon their earlier decision in the case - Union of India v. S.S.M. Bros. Pvt. Ltd. 1986 (24) E.L.T. 269 (Madras) the Madras High Court had held in the case - Rathna Fire Works Factory v. Superintendent of Central Excise 1992 (59) E.L.T. 23 (Madras) that trade discount is to be deducted from assessable value when known to buyer at or prior to removal of goods and that cash discount was an admissible deduction irrespective of whether such discount is uniform or not.
41. In the case - Modi Rayon and Silk Mills v. Collector, Central Excise, Meerut 1987 (29) E.L.T. 933 (Tribunal) relied upon by the respondent, the point for consideration was whether a quantity discount (or for that matter a cash discount) could be considered as a part of selling expenses. The Tribunal observed that the concept of selling expenses was different from that of trade discount. The Tribunal had observed that there was no controversy with regard to the admissibility of trade discounts per se.
42. In the case before us there is no issue with regard to the "selling expenses". The appellants had referred to in their price circular dated 10-4-1987, to the discount on monthly off-take basis, although the discount was said to be payable on quarterly basis by way of credit not as per actual monthly off-take of previous quarter. We, however, find that based on the contracts with their customers, only the net price, shorn of the discount, has been charged at the point of removal from the factory. This discount which was built-in the net discounted price chargeable at the factory gate at the time of removal could not be taken to be anything akin to the selling expenses. This net discounted price has been built in the contracts with the individual buyers and could not be considered anything else but the trade discount for whose exclusion at no point of time had there been any controversy.
43. In the case - Orient General Industries v. Collector, Central Excise, New Delhi - 1985 (21) E.L.T. 326 (Tribunal), the term 'trade discount' came up for consideration before the Tribunal. Quoting the definition of trade discount as given in Law Lexicon by Shri T.P. Mukherjee (A trade discount is a deduction from the catalogue price of goods allowed by wholesalers to retailers engaged in the trade), the Tribunal observed that the net amount is the sale price and that is the amount entered in the books of the respective parties as the amount payable towards the sale transaction.
44. In that case before the Tribunal the distributors had paid for the goods purchased by them as per the contract or list price. It was only at the end of the year that their eligibility to the incentive bonus discount was ascertained on the basis of the purchased turn over for the year. The Tribunal observed that in a case where the sale price remained undisturbed and the bonus discount was paid to the distributor subsequently based on a target figure to be determined by the manufacturer, it could not be considered a trade discount. Under the scheme envisaged in that case the bonus incentive was allowed to the dealers; if they exceeded the target based on the performance of the preceding year as fixed by the manufacturer. The Tribunal held that since the sale price had already been paid at the time of purchase, and the bonus discount was determined only after the end of the year, it could not be termed as trade discount and that it would be a sort of reward or gift or incentive for promoting sales; in other words, it was a contingent concession dependent on the basis of the purchase turn over or performance.
45. In the case before us the discount could not be considered as an incentive bonus discount. The quantity discount in this case before us could not be termed as a reward or gift or incentive for promoting sales. It was not a contingent concession.
46. Although the discount was declared to be on monthly off-take basis and was to be payable on quarterly basis by way of credit notes as per actual monthly off-take of previous quarter, in the case of three price lists before us for our consideration, we find that the discounted net prices in respect of the three customers had been firmly arrived at. Such discounted net prices were declared in price lists filed in Part II of the price list proforma. They were duly approved, by the Central Excise Officer. In the gate passes and invoices such approved prices were shown. The price originally paid was the approved discounted net price. The eligibility to the discount has been arrived at on the basis of acceptance of the terms and through placing of orders.
47. In the case - Kerala State Detergents and Chemicals Ltd. v. Collector of Central Excise, Cochin 1987 (27) E.L.T. 323 (Tribunal), the Tribunal had observed that it was for the appropriate Officer to determine the assessable value excluding from it such elements of the price at which goods are ordinarily sold that cannot form part of the assessable value, not for the assessee himself to deduct whatever he fancies from the actual price and declare the resultant as the price at which the goods are ordinarily sold. They added that in the form prescribed the assessee has to declare the actual price at which the goods are ordinarily sold and furnish detailed particulars of such elements like cost of packing or discount of which he claims exclusion in the determination of the assessable value. All the particulars furnished have to be declared to be true to the best of the knowledge and belief of the assessee.
48. In the case before us we find that the appellants had declared in the price list itself the name of the buyer and the contract order number. The xerox copy of the contract order was enclosed with the price list. The Central Excise Officer has verified the columns in the price list with reference to the contract order, and found correct. In column 13 of the price list, the Superintendent, Central Excise had accorded his approval to the value as declared by the appellant and claimed for approval in column 12. The price lists have been filed in part II of the price list proforma. The gate passes and the invoices confirm that the prices charged were the prices declared and approved.
49. Even in the earlier price list approved by the Assistant Collector, Central Excise, the discount pattern as shown in their price circular (a copy of which was enclosed with the price list) was indicated in column 7 with the remarks "Quantity discount admissible as per proposed price list except otherwise agreed upon". The reference is to their price circular dated 10-4-1987.
50. In the case - Collector of Central Excise, Pune v. Weikfield Products Company (India) Private Limited, Pune 1987 (28) E.L.T. 483 (Tribunal) the Tribunal had observed that the demand contrary to the approved list was permissible by the same or successor authority if the earlier approval was found to be erroneous due to non-consideration of the material facts or provisions.
51. There is nothing to show that the Superintendent, Central Excise while approving the price lists had failed to take into consideration the material facts or the provisions of law. Thus the observations in that case have no relevancy to the facts before us.
52. In the case - Collector, Central Excise v. Muzaffarnagar Steels 1989 (44) E.L.T. 552 (Tribunal), the appellants had filed a classification list indicating the particulars of goods as steel ingots, including steel melting scrap and this was admittedly approved by the Assistant Collector. The Tribunal observed that it could not be said that the appellants had suppressed any material fact. They added that the Assistant Collector was entitled to and indeed required to make such enquiries and summon such information as may be called for in order to arrive at the correct decision. In other words, the act of approval was not merely a passive act or concurrence but involves an active decision making.
53. In the case before us we find that the Superintendent, Central Excise has verified the contracts and approved the prices without any condition. We do not find anything on record to show that the approval was without basis or was erroneous.
54. In the case - Collector, Central Excise v. Dewarance Macnell and Company Limited 1991 (56) E.L.T. 645 (Tribunal) the respondents had filed classification lists since 1975, and the same were approved by the proper officer, and duty was accordingly paid under Tariff Item No. 68. The Tribunal observed that it could not, therefore, be said that they were guilty of any suppression or mis-statement of facts, fraud, collusion etc.
55. Similar views had been expressed by the Tribunal in the case - Safari Industries (I) Private Limited v. Collector, Central Excise 1991 (54) E.L.T. 308 (Tribunal) about alleging suppression.
56. In the case before us also we do not find that any relevant information has been withheld by the appellants from the revenue.
57. In the case - Sandoz India Limited v. Collector of Central Excise 1992 (60) E.L.T. 624 (Tribunal), relying on the Supreme Court decision in the case of Union of India v. Bombay Tyre International (supra) the Tribunal has observed that as long as the discounts are made known prior to the removal of the goods, they are admissible deductions. In that case before the Tribunal the discounts were declared in the price lists. They were known prior to the removal of goods and were given at the time of removal of goods. The Tribunal held in that case that the discounts should be allowed.
58. In the case before us also the deductions were known prior to the removal of the goods and were given at the time of removal of goods.
59. In the case relating to Dharamsi Morarji Chemical Company Limited, Maharashtra 1982 (10) E.L.T. 506 (GOI), the matter related to the admissibility of quantity discount on sulphuric acid (oleum) captively consumed for manufacturing fertilisers. The quantity discount was claimed on the ground that such a discount was available to outside consumers who lifted the quantity of 650/700 tonnes of oleum within January-September. The Government of India observed that the quantity trade discount was conditional on future transactions reaching fixed figures. Further, the quantity removed for captive consumption in that case did not even reach the fixed figures. Hence, they held that the same was not admissible under Section 4 of the Act.
60. The facts in the case before us are different from those before the Government of India in the above case. Here, the discounted net prices have been billed in the invoices. Such discounted prices were firm. The net price is by way of contract price and the price lists were submitted and approved in Part II of the price list proforma. This decision of the Government of India is prior to the decision of the Hon'ble Supreme Court in the case - Union of India v. Bombay Tyre International (supra). Hence, we do not consider it relevant for arriving at the decision in this case.
61. In the light of the above discussions, we set aside the Order-in-Ap-peal No. 163-165/Cal. II/RA/89, dated 27th July, 1989 passed by the Collector of Central Excise (Appeals), Calcutta and allow the appeals with consequential relief, if any.