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PETITIONER: SESHASAYEE PAPER & BOARDS LIMITED, ERODE

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE, COIMBATORE

DATE OF JUDGMENT13/02/1990

BENCH: KANIA, M.H. BENCH: KANIA, M.H. VERMA, JAGDISH SARAN (J)

CITATION:  1990 AIR  974            1990 SCR  (1) 320  1990 SCC  (2) 146        JT 1990 (1)   197  1990 SCALE  (1)164

ACT:     Central Excises and Salt Act, 1944/Central Excise Rules, 1944:   Section  4  and  First  Schedule  Tariff  Item   No. 17--Excise  duty--Levy of--Paper and paper  boards  manufac- tured  by  assessee--’Trade discount’  and  ’service  charge discount’--Permissibility.

HEADNOTE:     The  appellant  who was engaged in  the  manufacture  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 promote 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  Excise  and Gold (Control)  Appellate  Tribunal  in respect  of  the deduction claimed on  account  of  ’service charge discount’ the appellant appealed to this court.     It  was  contended on behalf of the appellant  that  al- though  in  some of the sales the discount  allowed  to  the Indentors  might  have been described  as  ’service  charges discount’, that name could not govern the 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 have 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  agents  for services rendered by them as agents cannot be regarded as a 321 trade discount qualifying for deduction. [323B-C]

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    Union  of  India & Ors. v. Bombay  Tyres  International Pvt. Ltd., [1984] 17 E.L.T. 329 (S.C.) and Coromandel Ferti- lizers  Limited v. Union of India & Ors., [1984]  17  E.L.T. 607 (S.C.), referred to,      (2)  If in any case the purchaser named in the  invoice 18 the same as the Indentor, normal trade discount given  to the Indentor will be allowed as a deduction in the  determi- nation  of the normal price for the levy of the excise  duty subject to other relevant considerations. [324B-C]

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 32 17 of 1988.      From  the Judgment and Order dated 30.5.88 of the  Cus- toms Excise and Gold (Control) Appellate Tribunal, New Delhi in E/Misc/ 194/87-A & E/A 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  re- ferred to as "the said Tribunal"].     As  the  controversy before us is an  extremely  limited one,  we  propose to set out only the  facts  necessary  for appreciating that controversy.     The appellant is a public limited company engaged  inter alia in the manufacture 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 (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 July 26, 1983. The appellant filed several price lists in Part I and Part II in respect of the clearances of paper and 322 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 thereof 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  appel- lant 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 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

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Indentor. We propose to refer to the dealers engaged by  the appellant  to promote the sales of its products  as  "Inden- tors" for the sake of convenience. Clause (3) of the  agree- ment  shows that the Indentor 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 Indentors agreed to deposit with the company a certain amount of money as security. Clause (8) of the  agreement  shows  that the  Indentors  held  themselves responsible  for  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  agreement with the Indentors, 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 deliv- ered  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 respect  of  some  of the aforesaid sales  might  have  been described as service charge 323 discount  that name could not govern the real nature of  the transaction and the discount was really a trade discount. It was  submitted  by him that this discount should  have  been allowed  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 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  set- tled  that 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  agents  for services rendered by them as agents cannot be regarded as  a trade  discount qualifying for deduction (Coromandel  Ferti- lizers 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 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  dis- count  given to them has been allowed as a deduction. More- over,  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 that although in some of the cases the Indentor might not be shown as  the purchaser  and the purchaser shown is the  different  party,

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yet the real nature of the transaction was that the Indentor purchased  the goods referred to in the said 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  are  of the view that it is not open to the appellant to raise  this contention  at  this 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 that of the Indentor, it was really the  Indentor who was the purchaser and he in turn has  sold the goods to the third party whose name was shown as 324 purchaser  or  even that the Indentor had entered  into  the transaction as the agent of the purchaser. If such a conten- tion  had been raised, the factual position could have  been examined  and different considerations might have  been  ap- plied.  But  it is certainly not open to  the  appellant  to raise this contention at this stage, in this appeal, partic- ularly keeping in mind that the Tribunal is the final  fact- finding  authority.  No  other contention  has  been  raised before us.     In  our 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 Indentor,  normal  trade discount  given to the Indentor will be allowed as a  deduc- tion  in the determination 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 extent of the aforesaid clarification. The  appellant to pay the costs of the appeal to the respondent. R.S.S.                                         Appeal   dis- missed. 325