Regional pricing discount and E-1 forms were insufficient to prove diversion or excise evasion without supporting evidence.

Regional pricing discounts were examined in the context of an allegation that goods had been diverted from one region to another. The record showed factory-gate sales, no evidence of any predetermined plan to divert goods, and no correspondence or other material indicating mala fide conduct. Issuance of E-1 forms was treated as a statutory requirement under sales tax law and, by itself, was insufficient to establish the assessee's complicity in diversion or excise duty evasion. On that basis, the discount was allowed and the diversion allegation was not proved.

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Issues: Whether the discount claimed by the assessee was liable to be disallowed on the allegation that the goods were diverted from one region to another, and whether the issuance of E-1 forms by the dealers established the assessee's complicity in such diversion.

Analysis: The Commissioner had examined the regional pricing arrangement, the factory-gate sales, and the absence of any allegation or evidence showing a predetermined intention to divert goods. The record also did not contain correspondence or other material to show mala fide conduct. The issuance of E-1 forms was found to be a legal requirement under the sales tax law and, by itself, was not sufficient to prove that the assessee encouraged diversion or evasion of excise duty.

Conclusion: The discount was rightly allowed, and the allegation of diversion based on E-1 forms was not proved. The Revenue's appeal was dismissed.

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