Quantity discount admissibility sustains where clearance records show a genuine scheme and no excess duty-free stock clearance.

Quantity discount schemes supported by circulars and invoices were treated as admissible where the supplies were in substance discounts known at the time of clearance. The temporary arrangement allowing distributors to use existing stock and later replenish it was viewed as part of the scheme, not as a permanent or impermissible device. In the absence of any finding that goods were cleared in excess of the permitted quantity without duty payment, the duty demand and penalty were held unsustainable, and the later period had also been decided favourably in appellate proceedings.

---

---

Issues: Whether the quantity discount scheme adopted by the manufacturer was admissible for the relevant period and whether the demand and penalty could be sustained on the ground that free replenishment of stock to distributors was impermissible.

Analysis: The circulars and invoices showed that the supplies made under the scheme were in substance quantity discounts known at the time of clearance. The initial arrangement permitting distributors to use their existing stock and later replenish it was only part of the scheme and was not shown to be a permanent or suspect device. There was no finding that goods were cleared in excess of the permitted quantity without duty payment, and the later period had also been favourably decided by the appellate authority.

Conclusion: The quantity discount was allowable and the duty demand and penalty could not be sustained.

---