Trade discount for sister concern disallowed in excise valuation absent proof of commercial justification and arm's-length pricing.

A special trade discount to a sister concern is admissible for excise valuation only if the assessee proves, with acceptable evidence, that the differential treatment rests on identifiable commercial considerations and that the sale is at arm's length. Where the discount is not shown to follow any ascertainable criterion and is not extended to similarly placed independent buyers, it cannot reduce assessable value under Section 4 of the Central Excise Act, 1944. On the stated facts, the discount was disallowed for valuation purposes, and the demand and penalty were sustained.

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Issues: Whether the special discount of 15% allowed to a sister concern on excisable goods was admissible for valuation under Section 4 of the Central Excise Act, 1944.

Analysis: A different trade discount can be permitted only where the assessee proves by acceptable evidence that the differential treatment is founded on well-defined commercial considerations and that the transaction remains at arm's length. The discount here was not shown to be based on any ascertainable criterion, and it was not extended to independent buyers similarly placed. The cited authority on discounts to different classes of buyers in different regions did not assist the assessee on these facts.

Conclusion: The special discount was not admissible for valuation purposes and the demand and penalty were sustained.

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