Case: Duke and Sons Vs. Union of India

M.L. PENDSE, J. ( 1 ) THIS petition under Article 226 of the Constitution of India was filed on March 27, 1981 to challenge legality of ordered dated March 13, 1981, passed by Assistant Collector, Central excise, Bombay Division. The petition was admitted on March 30, 1981. During the pendency of the petition, the decision of the Supreme Court reported in 1983 (14) E. L. T. 1896 (Union v. Bombay Tyers International) was delivered setting out the scope and ambit of Section 4 of the central Excise and Salt Act. The decision of the Supreme Court prescribes what deductions are permissible from the normal price to determine the assessable value. After the decision of the Supreme Court, the petition was placed before one of us (Pendse, J.) and by order dated December 9, 1983, the proceedings were remitted back to the Assistant Collector with a direction to reconsider the matter in the light of the decision of the Supreme Court. The petitioners were permitted to file revised price list for proper determination of excise duty liability in respect of the claim of deductions. The Company was desirous of seeking deductions in respect of (a) transportation cost, (b) trade discount (rebate on cash sales), (c) Distributors expenses, (d) commission to cartmen (Delivery Department expenses), and (e) forklift expenses, among others. ( 2 ) IN accordance with the order passed by this Court, the petitioners addressed letter dated February 1, 1984 to the Assistant Collector, Central Excise, Bombay setting out the information to substantiate the claim for deductions under various heads. The Assistant Collector by order dated November 25, 1989 granted deductions in respect of some items subject to verification of facts and documents and directed that the price list will be finalised accordingly. The Assistant collector by the impugned order disallowed certain items claimed by the Company and thereupon the petitioners amended the petition and are challenging findings on some of the items which the correctness of the order of the Assistant Collector in respect of items now in dispute.( 3 ) THE Company had claimed deduction under the heading transportation cost and the Assistant collector had allowed deduction in respect of transport cost from the factory gate to the place of wholesale buyer. The Assistant Collector declined to allowed transportation cost for the return of empty bottles. The Assistant Collector observed that bottles and crates are essential items for manufacture and sale of aerated waters and as the aerated waters cannot be marketed without bottles and crates, the coast of transport of return of bottles and crates cannot be permitted. Mrs. Mody, learned counsel appearing on behalf of the Company, submitted that the decision of the assistant Collector in respect of transport cost for the return of empty bottles cannot be sustained in view of the decision of the Supreme Court reported in 1988 (36) E. L. T. 723 (Indian Oxygen ltd. v. Union of India and Others). The Division Bench after considering the ratio laid down by the Supreme Court held that the assessee will be entitled to deduction on account of cost of transportation not only from the factory gate to the destination of the wholesale buyer but also in respect of return of empty bottles. In view of the decision relied upon by the learned Counsel, the order of the Assistant Collector declining to grant deduction in respect of transport cost of return of empty bottles to the factory cannot be sustained. ( 4 ) MRS. Mody then complained that the Assistant Collector was in error in disallowing the claim in respect of trade discount (rebate on cash sales). The learned Counsel urged that by letter dated February 1, 1984, it was pointed out to the Assistant Collector that the rebate is granted to a customer for a period of over 30 years. The letter further recites that outlets stocking Dukes beverages and generating a minimum sale of 1,800 dozen annually are eligible for this rebate and this rebate is restricted to the metropolitan city of Bombay. The Percentage of trade discount is also determined as 5% in respect of soda and flavoured aerated beverages and 3% in respect of ready to serve beverages. The letter further recites that the rebate books are given to the customers to write daily purchases and to hand over the counter-foils of the salesman concerned. Mrs. Mody submitted that the Company had offered to produce the vouchers and ledgers before the Assistant Collector and the accuracy of the claim was examined by the Department but rebates was disallowed on the claim was examined by the Department but rebate was disallowed on the ground that the amounts of rebate are not certain at the time of clearance from the factory gate. The Assistant Collector felt that the rebate is not in the nature of discount but is in the nature of incentive and granted after the invoices are raised and the removal of the goods was complete. Mrs. Mody submits and, in our judgment, with considerable merit that the Assistant collector has failed to properly examine the claim made by the Company. The learned Counsel urged that the Company has presented a specific case before the Assistant Collector that the rebate is granted for a period of over 30 years and the percentage of trade discount is fixed and the vouchers and ledger accounts are maintained in respect of grant of rebate. Mrs. Mody submitted that it is well- settled that the question as to whether the rebate is granted and whether it forms normal discount is to be determined with reference to the facts of every case and it is not permissible to overlook the factual data produced by the Company and deny the deduction claimed. In our judgment, the submission is correct and deserves acceptance. It is necessary for the Assistant Collector to examine whether the claim made by the Company that the rebate was granted for a period over 30 years at fixed rate and is reflected in the vouchers and account books is correct or otherwise. The Assistant Collector will examine the record relied upon by the company and then determine afresh whether a trade discount should be allowed or otherwise. It is, therefore, necessary to remit the proceedings back to the Assistant Collector for determination of this aspect.( 5 ) MRS. Mody then submitted that the Assistant Collector was in error in disallowing the distributors expenses claimed by the Company. We are unable to find any merit in the contention. The Company claimed that the distributors expenses were towards expenses of 25 independent persons appointed by the Company and who were responsible for ensuring that the empty bottles and crates are returned. The learned Counsel urged that such distributors were paid 2 to 2 1/2% of the net sales value for ensuring the return of empty bottles and crates. It was contended that the task of distributor was, therefore, to fulfill the sales transaction and not to promote the sales. The Assistant Collector turned down the contention by holding that the claim made in respect of sales promotion and the decision of the Supreme Court in Bombay Tyer international specifically provides that such expenses cannot be deducted but are to be included. Mrs. Mody submitted that the Company will be able to produce evidence to establish that 2 1/2% of net sale value was paid towards distributors expenses for return of bottles and crates. We enquired from the learned counsel as to whether any argument is entered into with distributors providing for this kind of payment and the reply was that there is no agreement with the distributors. In theses circumstances, we are unable to accede to the submission of the learned counsel that the finding of the Assistant Collector on this aspect suffers from infirmity. In our judgment, the Assistant Collector has rightly held that the amount claimed is in respect of promotion of sales and will have to be included. ( 6 ) THE last items in respect of which Mrs. Mody made grievance is commission to cartmen (Delivery Department expenses). The learned Counsel urged that the commission paid to cartmen is in respect of transportation work and as transportation costs are liable to be excluded while determining the assessable value, the Assistant Collector was in error in disallowing commission to cartmen. The Assistant Collector held that in the light of the decision of the supreme Court reported in 1986 (23) E. L. T. 6 [mopeds (India) v. assistant Collector of central excise], it is not permissible to grant deduction on this count. We enquired from Mrs. Mody as to why the commission to cartmen is not included in the transportation cost and there was no satisfactory answer. It was urged that commission was paid to the purpose of loading bottles and crates in pursuance of the agreement entered into with the Employees Union. The question is not why the payment is made to the cartmen but why it was not included as part of the transport cost. The fact that the Company had not earlier included the expenses for determination of assessable value makes it doubtful whether the amount was really towards transportation cost. In our judgment, the finding on this aspect of the Assistant Collector is not required to be disturbed.

Decision:
1[ds]In our judgment, the submission is correct and deserves acceptance. It is necessary for the Assistant Collector to examine whether the claim made by the Company that the rebate was granted for a period over 30 years at fixed rate and is reflected in the vouchers and account books is correct or otherwise. The Assistant Collector will examine the record relied upon by the company and then determine afresh whether a trade discount should be allowed or otherwise. It is, therefore, necessary to remit the proceedings back to the Assistant Collector for determination of thisare unable to find any merit in theenquired from the learned counsel as to whether any argument is entered into with distributors providing for this kind of payment and the reply was that there is no agreement with the distributors. In theses circumstances, we are unable to accede to the submission of the learned counsel that the finding of the Assistant Collector on this aspect suffers from infirmity. In our judgment, the Assistant Collector has rightly held that the amount claimed is in respect of promotion of sales and will have to bequestion is not why the payment is made to the cartmen but why it was not included as part of the transport cost. The fact that the Company had not earlier included the expenses for determination of assessable value makes it doubtful whether the amount was really towards transportation cost. In our judgment, the finding on this aspect of the Assistant Collector is not required to be disturbed.