SESHASAYEE PAPER & BOARDS LIMITED, ERODE v.

COLLECTOR OF CENTRAL EXCISE, COIMBATORE

FEBRUARY 13, 1990

[M.H. KANIA AND J.S. VERMA, JJ.]

Central Excises and Salt Act, 1944/Central Excise Rules, 1944: Section 4 and First Schedule Tariff Item N2 17-Excise duty-Levy of-Paper and paper boards manufactured by assessee-'Trade discount' and 'service charf{e discount'-Permissibility.

The appellant who was engaged in the mannfacture of paper and paper boards which were assessable under Tariff Item No. 17 of the First Schedule to the Central Excises and Salt Act, 1944, engaged several dealers referred to as Indentors, with a view to pr'lmote its sales. In the fixation of the normal price of these items under section 4 of the Act for the purpose of levy of excise duty, the appellant claimed deduction on account of 'service charge discount' paid to the Indentors, in addition to the 'trade discount' paid to the purchasers.

Having failed before the assessing authority and the Central

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Excise and Gold (Control) Appellate Tribunal in respect of the deduc- E tion claimed on account of •service charge discount' the appellant appealed to this court.

It was contended on behalf of the appellant that although in some of the sales the discount allowed to the lndentors might have been described as 'service charges discount', that name could not govern the J1 real nature of the transaction and the discount was really a 'trade )

discount'. It was further contended that in several cases the indentors were really the purchasers themselves and hence, the normal trade discount paid to them should hav been allowed as a deduction.

Dismissing the appeal, this Court,

HELD: (1) The trade discount was discount paid to the purchaser in accordance with the normal practice of the trade. In the determination of the normal price for the purposes of levy of excise duty, it is only a normal trade discount which is paid to the purchaser which can be allowed as a deduction and commission paid to selling H agents for services rendered by them as agents cannot be regarded as a

/ '

PAPER & BOARD LTD. v. CENTRAL EXCISE (KANIA, J.) 321

trade discount qualifying for deduction. [3i3B-C]

Union of India & Ors. v, Bombay Tyres lnternatidndl Pvt, Ltd., [1984) 17 E, L, T, 329 (S.C.) and Coromandel Fertiliiefs Li!tiild v, Union of India & Ors., [1984] 17 E.L.T. 607 (S.C,); referred to,

(2) If in any case the purchaser named hi the invoice is the B same as the lndentor, normal trade discount given io the Irtdenior will be allowed as a deduction in the determinati<iii of the normal price for the levy of the excise dnty subject to other relevant considerations. [324B-C]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3217 C of 1988.

From the Judgment and Order dated 30.5.88 of the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi in E/Misc/ 194/87-A & BIA No. 1365/85-A & Order No. 308/88-A.

Gauri Shankar, Mrs. H. Wahi, Manoj Arora and S. Rajjappa for the Appellant.

Soli J. Sorabjee, Attorney General, V.C. Mahajan, R.P, Srivastava and P. Parmeshwaran for the Respondent.

The Judgment of the Court was delivered by

KANIA, J, This is an appeal preferred by the appellant (assessee) from a judgment of the Central Excise and Gold (Control) Appellate tribunal, New Delhi (hereinafter referred to as "the said

Tribunal").

As the controversy before us is an exiremely limited one; we propose to set out only the facts necessary fot appteciaiihg that controversy,

The appellant is a public limited company engaged iliier a/ia in (] the manufacture of paper and paper boards which were assessable under Tariff Item No. 17 of the First Scheduie to the Central Excises and Salt Act, 1944 (hereinafter referred to as "the Central Excises Act"). The period with which we are concerned in this appeal is the period September 9, 1979 to Juty 26, 1983. The appeltant filed several price lists in Part I and Part II iii respect of the deatances bf pttpet and H

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paper boards made by the appellant. Section 4 of the Central Excises Act prescribes the mode of valuation of excisable goods for the purposes of charging of the duty of excise. Under clause (a) of subsection ( 1) of section 4, it is provided, in brief, that the duty of excise is chargeable on any excisable goods with reference to value which shall, subject to the other provisions of the Act, be deemed to be the normal price therof and the normal price, generally speaking, is the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place or removal, where the buyer is not a related person and the price is the sole consideration for the sale. In the fixation of the normal price of paper and paper boards manufactured by the appellant for the purposes of levy of excise duty, the appellant claimed several deductions. One of these deductions was described as "trade discount" and another as "service charge discount". The trade discount was the discount paid to the purchaser in accordance with the normal practice of the trade. The appellant had engaged several dealers with a view to promote its sales. A specimen of the usual agreements entered into by D the appellant with its dealers has been taken on record. The opening part of the said agreement shows that the appellant is referred to in the agreement as the company and the contracting dealer is referred to as the lndentor. We propose to refer to the dealers engaged by the appellant to promote the sales of its pruducts as "Indentors" _for the sake of convenience. Clause (3) of the agreement shows that the Indentor E agreed to purchase in his own name or procure acceptable indents from third parties for paper and paper boards manufactured by the company would be of such quantities and varieties as set out in the Schedule A to the agreement. The lndentors agreed to deQosit with the company a certain amount of money as security. Clause (8) of the agreement shows that the Indentors held themselves responsible for F the immediate clearance of the documents relating to the supply of paper on presentation by the bankers and that all bank charges other than discounting charges would be on the consignee's account.

It is common ground that in the invoices in respect of the paper and paper boards supplied and sold pursuant to the aforesaid agree- G ment with the lndentors, in most cases the name of the dealer concerned was shown as the Indentor and the names of the parties to whom the goods were to be delivered were shown as the purchasers but in some cases the Indentors were themselves shown as purchasers.

It was urged by Dr. Gauri Shankar, learned counsel for the appellant, that although the discount allowed to the Indentors in respct of some H of the aforesaid sales might have been described as service charge

PAPER & BOARD LfD. v. CENTRAL EXCISE (KANIA, J.] 323

discount that name could not govern the real nature of the transaction A and the discount was really a trade discount. It was submitted by him that this discount should have been alhwed as a deduction in the determination of the normal price of the aforesaid goods for the purpose. of levy of excise duty. He relied upon the decision of this Court in Union of India & Ors. v. Bombay Tyres International Pvt.

Ltd., [1984] 17 E.L.T. 329 (S.C) and submitted that the nomenclature B given to the discount could not be regarded as decisive of the real nature of the discount. There can.be no quarrel with this proposition. But it is equally well settled that in the determination of the normal price for the purposes of levy of excise duty, it is only a normal trade dis- -count which is paid to the purchaser which can be allowed as a deduction and commis.sion paid to selling agents for services rendered by C them as agents cannot be regarded as a trade discount qualifying for deduction ( Coromandel Fertilizers Limited v. Union of India and Ors.,

[1984] 17 E.L.T. 607 (S.C.). The correctness of this proposition was not disputed by learned counsel for the appellant but it was submitted by him that in several cases where supplies had been effected pursuant to the aforesaid agreements, the Indentors, were really themselves the D purchasers and hence, the normal trade discount paid to them should have been allowed as a deduction in the determination of the normal price for the purposes of levy of excise duty. We find from the judgment of the Tribunal and the lower authorities that there is no dispute that wherever the Indentors are shown as the purchasers in the respective invoices, the trade discount given to them has been allowed as a E deduction. Moreover, to obviate any controversy In this regard, learned Attorney General who. appears for the respondent fairly states that when the matter goes back to the Tribunal, the respondent is agreeable that the normal trade discount may be allowed in those cases where the Indentor is also shown as the purchaser in the concerned invoice. It is, however, submitted by learned counsel for the appellant F that although in some of the cases the Indentor might not be shown as the purchaser and the purchaser shown is the different. party, yet the real nature of the transaction was that the lndentor purcfiased the goods referred to in the sai.d invoice and. in turn sold it to a customer whose name was shown as the purchaser in the invoice for the sake of convenience so that the delivery could be directly effected to him. We G are of the vfew that it is not open to the appellant to raise this contention at t.his stage. No case has ever been made out right upto the Tribunal and even before the Tribunal that in respect of any particular invoice although the name of the purchaser was other than tfiat of the lndentor, it was really the lndentor who was the purchaser and he in turn has sold the goods to the third party whose name was shown as H

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A purchaser or even that the Indentor had entered into the transaction as the agent of the purchaser. If such a contehtion had been raised, the factual position could have been examined and different considerations inighi have been applied. But it is certainly not open to the appellant to raise this contention at this stage, in this appeal, particularly keepihg in mind that the Tribunal is the final fact-finding authority. No other contention has been raised before us.

In ciut opinion, there is no merit in the appeal. there will, however, be one clarification that, as agreed to learned Attorney General, if in any case the purchaser named in the invoice is the same as the lndetltor; nofinal trade discount given to the Indentor will be allowedl!S a deduciion ill the deterrnination of the normal price for the levy of excise duty subject to other relevant considerations,

In the result, the appeal fails and is dismissed, save to the exteht of the aforesaid clarification. The appellant to pay the costs of the appeal to the respondent.

R.S.S.

Appeal dismissed.