Excise valuation and selective buyer discounts: deduction allowed only when proven as bona fide trade discount, not extra-commercial consideration.

In excise valuation under section 4 of the Central Excise Act, a discount given only to selected buyers is deductible only if it is established as a bona fide trade discount and not one driven by extra-commercial considerations. The Tribunal noted that bulk-purchase discounts may be commercially justified, but the evidence did not show the disputed discount to be a normal trade discount. Material produced for the first time before the Tribunal was not examined, and the case concerned the admissibility of the discount itself rather than recomputation of value on sales to related persons. The discount was therefore treated as inadmissible.

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Issues: Whether the higher discount granted to the two buyers was admissible as a normal trade discount for valuation under excise law, or was liable to be excluded as being influenced by extra-commercial considerations.

Analysis: The dispute concerned valuation of excisable goods under section 4 of the Central Excise Act. The lower authorities held that the higher discount granted only to the two buyers was not a normal trade discount, but was based on extra-commercial considerations. The Tribunal noted that while bulk-purchase discounts may be permissible where they are commercially justified, the evidence before the appellate authority supported the finding that the disputed discount was not shown to be a normal trade discount. Fresh material produced for the first time before the Tribunal could not be examined where it had not been tested by the lower appellate authority. The Tribunal also noted that the case was not one where the assessable value was being recomputed on the sale price of related persons, but one where the admissibility of the discount itself was in question.

Conclusion: The discount granted to GEM and FE was inadmissible as a trade discount and the finding that it was influenced by extra-commercial considerations was upheld, in favour of the Revenue.

Final Conclusion: The appeal failed and the order denying deduction of the disputed discount from assessable value was sustained.

Ratio Decidendi: A discount allowed only to selected buyers is deductible from assessable value only if it is established as a bona fide trade discount and not one founded on extra-commercial considerations.

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