Trade discount must be deducted where valuation depends on wholesale cash price and negligible direct sales do not the basis.

For valuation under Section 4(a) of the Central Excises and Salt Act, 1944, assessable value had to be based on the wholesale cash price, and an established trade discount allowed to sole agents was deductible from the gross price. The authority failed to examine whether the limited sales to workmen and private parties without discount were merely small direct consumer sales, rather than true wholesale sales capable of fixing the price basis. In the absence of such material, treating those negligible sales as decisive was arbitrary. The trade discount was therefore required to be deducted, and the demand notice founded on the assessment was quashed.

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Issues: Whether, for valuation under Section 4(a) of the Central Excises and Salt Act, 1944, the trade discount allowed by the manufacturer to its sole agents had to be deducted from the gross price, and whether small sales to workmen and private parties without discount could be treated as wholesale sales to deny such deduction.

Analysis: The assessable value under Section 4(a) had to be determined on the basis of the wholesale cash price at which the goods were sold. The discount given to the sole agents was admitted, and the authority had not examined whether the no-discount sales were mere small direct sales to consumers rather than wholesale sales. Such negligible sales could not, without more, be treated as the basis for wholesale cash price. The refusal to deduct the established trade discount was therefore unsupported by material and arbitrary.

Conclusion: The trade discount was required to be deducted, and the demand notice founded on the impugned assessment was quashed.

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