Customs, Excise and Gold Tribunal - Delhi
Ind-Sphinx Precision Pvt. Ltd. vs Collector Of C. Excise on 21 October, 1994
Equivalent citations: 1994(74)ELT683(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. The appellants are engaged in the manufacture of PCB Drills falling under Chapter sub-heading 8207.00 of the Central Excise Tariff. The goods manufactured by the appellants are consumed both by the public sector, Government Companies & Private Companies. Consequently, the appellants filed price lists in part II during the period between 18-2-1992 and 25-11-1992 for clearance of goods, claiming different deductions on the list price. Price lists are filed separately for each consumer together with copies of the purchase order/rate contract. The Assistant Collector as per the impugned orders allowed deductions claimed in respect of sales to Government agencies but disallowed deductions in respect of sales to private buyers on the ground that the private buyers comprise a single class and that the appellants cannot give different deductions to some class of buyers. While upholding the view of the Assistant Collector, the Collector (Appeals) observed that uniformity is the sole criteria and there can be no valid reason for variation of prices within the same class of buyers, variation can exist within different class of buyers but not within the same class.
2. Ms. Archana Wadhwa, learned Counsel appearing for the appellants submitted that the issue relates to deductions of trade discount. The point to be considered in this case is whether different discounts can be allowed to the customers belonging to same category of buyers viz. industrial consumers or not while determining the assessable value irrespective of the uniformity in discount. Admittedly all the customers in this case are industrial consumers and various discounts offered to different customers purely on commercial consideration. Different discounts offered to three categories viz. Government Undertakings, Public Sector Undertakings and Private parties were given and the same position was accepted upto 1992 but after February, 1992 the show cause notice was issued for denying trade discount on the ground of non-uniformity in discounts. She said that non-uniformity by itself is not a ground for denial of trade discount and the case law was cited before the authorities below but the same was not followed by the authorities in deciding the issue. Discounts were given and passed on to the buyers and this was not doubted by the authorities below but disallowed only on the ground of non-uniformity. She drew our attention to the observation made by the Collector (Appeals) that there may be no extra-commercial considerations to the appellants, yet variation in prices to be explained more than merely it being commercial consideration and uniformity is the sole criteria. She said that trade discount is not in uniformity or is given at different rates to different purchasers; cannot by itself, disqualifying the discount from being excluded for determination of true assessable value so long as the lack of uniformity is prompted on any extra-commercial consideration. Industrial consumers need not be of one class of buyers and now this issue has been settled by the decision of the Tribunal in the case of Travancore Cements Ltd. v. Collector of Central Excise - 1994 (1) RLT 212 (Trib.) wherein it was held - there can be more than one normal price in respect of industrial consumers on the basis of regions, taking into account marketing considerations prevailing in the said regions so long as the price charged is the price at which the goods are ordinarily sold by the assessee in the course of wholesale trade; buyer is not a related person and the price is the sole consideration for sale. Accordingly actual price charged from the customer is relevant for the purpose of determining the assessable value under Section 4(i)(a) of the Act. Manufacturer may enter into different contracts with different industrial consumers and only it should be shown that the transaction is not influenced by extra-commercial consideration. Genuineness of contract is not doubted in this case and there need not be uniformity of price since each price charged from different buyers is the normal price in relation to each of them and she referred to the decision in the case of Goramal Hariram Ltd., New Delhi v. Collector of Central Excise - 1994 (23) ETR 10, in support of her contention. She said that once contract is found genuine, the Department cannot travel beyond the terms of the contract and contract price with customers cannot be doubted merely because bulk of the goods are sold to them relying upon the decision in the case of Amar Chemical Industries v. Collector of Central Excise, reported in 1992 (58) E.L.T. 85.
3. Arguing for the Revenue Sh. A.K. Singhal, learned JDR submitted that though the different class of buyers as such has not been defined in the Act, normal practice in the wholesale trade is the criterion to ascertain different class of buyers. He said that the Department was justified in not accepting the different price or different discounts to the same class of buyers among industrial consumers since consideration for such variation was not made known and there is no rational nexus between discount and commercial consideration. The case law cited by the appellants' Counsel in the case of Travancore Cements Ltd. (supra) and Goramal Hariram Ltd. are not applicable since they were dealt with the issue of regional discount on commercial consideration due to local taxes. He said that to claim discount it should be established by an agreement or practice and in the absence of established practice or if there is no uniformity in discount same cannot be allowed as permissible deduction and referred to the following decisions :-
1. Union of India and Ors. v. Bombay Tyre International Private Limited - 1984 (17) E.L.T. 329.
2. Collector of Central Excise v. Metal Box India Ltd. -1989 (39) E.L.T. 79.
3. Gabriel India Ltd. v. Union of India -1992 (62) E.L.T. 79
4. Shakti Insulated Wires (P) Ltd. v. Collector of Central Excise -1990 (49) E.L.T. 554.
5. Bombay Latex & Dispersions Pvt. Ltd. v. Collector of Central Excise, Bombay -1985 (19) E.L.T. 527.
He contended that discount is not uniform and in fact no discount was allowed for... and hence discount varies from no discount to 30% discount. Case law cited by the authorities below was with reference to different discounts to different class of buyers and same is not applicable to the facts of this case.
4. In reply it was submitted that industrial consumers can be divided into further classification of buyers in view of the latest case law on this point and no such condition of uniform discount was stipulated in Section 4(4)(d)(ii). Further contract was not doubted by the Department and no case of extra-commercial consideration has been made out by the Department. Onus is on the Department to show that transaction was not on commercial consideration or discount was not allowed by trade practice and on the other hand party has proved that it was purely on commercial consideration.
5. We have considered the rival submissions. The first point to be considered in this case is whether there can be more than one normal price among different buyers of the same class of buyers viz. industrial consumers. On going through the facts and circumstances of the case, we find that this issue has been settled by the decisions in the case of Travancore Cements Ltd. and Goramal Hariram Ltd. (supra) and accordingly there can be more than one normal price in respect of industrial consumers and price charged from these different class of buyers is the normal price in relation to each of them provided the contract is genuine. In the instant case contract was not doubted and no case has been made out by the Department that transaction was not at arm's length as it was rightly pointed out by the appellant's Counsel.
6. Next question arises whether the discount as declared in price list should be allowed in respect of all sales in spite of the fact that there was no uniformity in discount. This position was already considered in the case law cited by the appellants and referred to in the impugned order. Accordingly (1) trade discount need not be uniform but may vary from dealer to dealer, place to place and from time to time depending upon commercial exigencies. The law does not prescribe that there should be uniformity of discount in all circumstances. In fact, there is absolutely no prohibition against allowing different discounts under the provisions of the Act. The fact that in allowing different discounts there will be different assessable values will not affect the position.
6.2 Section 4 of the Central Excises & Salt Act, 1944, does not prohibit the exclusion of trade discount if it is not allowed uniformly to all buyers because Section 4(4)(d)(ii) specifies only the following conditions for admissibility of trade discount: (i) that such trade discount is not refundable on any account; (ii) that such discount is allowed at the time of removal of the goods from the manufactory; and (iii) that such discount is in accordance with the trade practice of the wholesale trade in respect of such goods.
6.3 If the above conditions are satisfied, the trade discount if actually allowed, cannot be denied because excepting the above statutory conditions the imposition of any other condition such as uniformity of discount is extra- legal. Moreover, the present Section 4 contemplates admissibility of different assessable values for same type of goods, therefore, in principle it also accepts the possibility of varying rates of trade discounts. The deduction for trade discount is thus permissible even if it is not given uniformly because the condition of uniform trade discount is unwarranted and reading of such a condition in Section 4 of the Central Excises & Salt Act, 1944 clearly contravenes the provisions of Section 4 as the words 'trade discount' in this Section have not been qualified by the word 'uniform'. Even otherwise, the trade discount is bound to vary if some dealers take guarantee of purchasing larger quantities. The different percentages can be given for various reasons such as (1) status of buyer; (2) class of buyer; (3) quantity of the goods sold; (4) favourable or unfavourable market conditions in a particular region or at a particular point of time; (5) financial crisis; (6) cut-throat competition and (7) introduction of a product in a new region. But whatever may be the reason for allowing different rates of trade discounts, their variation must be based on commercial considerations. Therefore, different rates of trade discount are admissible so long as the lack of uniformity is not found on any extra-commercial consideration.
7. In view of our foregoing conclusion, we set aside the impugned order and accordingly the appeal is allowed with consequential relief.