TaxTMI 
TaxTMI 
1993 (1) TMI 162
X X X X Extracts X X X X
X X X X Extracts X X X X
....oduct, different trade discounts resulting in different assessable values were not permissible. Later by an order dated 4-1-1991 the Assistant Collector held that distributors could not be categorised as a different class of buyers merely for the reason that they had entered into an agreement with the assessee. He, therefore, ordered that the trade discount admissible to other wholesale buyers would also be admissible to the distributors. Being aggrieved by the order passed by me Assistant Collector the appellants preferred an appeal before the Collector (Appeals). In the impugned order, the Collector (Appeals) observed that the distributors were charged with the responsibility of advertising and sales promotion in their area which was primarily the responsibility of the manufacturer. On the grounds that 10% extra trade discount extended to the distributors was in the nature of compensation for the jobs undertaken by the distributors on behalf of the appellants and there was no material difference between the wholesale dealers and distributors, the Collector (Appeals) held that higher discount offered to distributors was not warranted, and rejected the appeal. 3. On behalf of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... responsibility for advertising the products in different parts of the country rested with the appellants in different parts of the country rested with the appellants and even though the option to advertise on regional basis was available to the distributors, there was no evidence on record that distributors had in fact incurred any expenditure on this account. He contended that even if any such expenditure was incurred by the distributors it would not form a part of the assessable value. 4. On behalf of the Revenue, the learned SDR Smt. C.G. Lal reiterated the findings of the Collector (Appeals) in the impugned order. 5. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the only question that arises for consideration in this case is whether the distributors who had entered into agreement with the appellants undertaking to buy the specified quantity of goods every month and take measures for promoting sales in their territory were entitled to additional 10% discount over and above the discount admissible to other wholesale buyers who did not enter into such agreement with the appellants. 6. It is seen that the q....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... considerations. In this case though the authorities proceed to deny the benefit of the deduction of trade discount from the list price merely because they are not uniform and they have not given any finding that the different rates of trade discount had been adopted on extra-commercial considerations. Therefore, in view of the said decision of the Supreme Court, trade discount has to be allowed even if the rates are not uniform." 7. We find that in the case of Mahendra and Mahendra Limited v. Union of India reported in 1984 (16) E.L.T. 76 the Hon'ble Bombay High Court has held that even if in terms of an agreement of distributorship with the manufacturer the wholesale buyer carries out after sale service and shares the amount spent on advertisement, the transaction would still have to be deemed as on principal to principal basis. Para 11 of the judgment is reproduced below :- 11. Shri Dalal then submitted that under the agreement, the Voltas were required to carry out the activities of the manufacturers and, therefore, want the petitioners intended to do was to transfer some of the activities of the manufacturers to Voltas with a view to reduce the assessable value for the purpo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n'ble High Court of Andhra Pradesh has held that trade discount need not be uniform but may vary from dealer to dealer, place to place and from time to time depending upon commercial exigencies and the fact that different discounts will result in different assessable values will not affect the position since there is no prohibition in the Act against allowing different discounts. The relevant extract from para 11 of the judgment is reproduced below: "11. The other aspect that remains for consideration is regarding the trade discount. The petitioner claimed allowance of a trade discount of 23% given to Usha Sales Private Ltd., Hyderabad and M/s. Nathoo Laljee, Hyderabad. At the outset it must be stated that the factum of giving 23% discount to them is not disputed. The primary authority as well as the appellate and revisional authorities held that uniform discount of 15% only should be allowed to these dealers also like others and there should be no exception regarding these two dealers. The revisional authority held that special discounts are not admissible under Section 4 of the Central Excises and Salt Act, 1944 and therefore the trade discount of 15% only should be allowed. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this judgment with facts and principles set out in the said decisions, but suffice to say, it is held that the discout may vary from dealer to dealer, for place to place and from time to time depending upon commercial exigencies". 8. In the case of Ramdas Motor Transport Ltd. v. Collector of Central Excise reported in 1988 (36) E.L.T. 629 the Tribunal has also held that extra differential discount to dealers in addition to the minimum discount, based on legitimate commercial consideration of volume of purchase would be legally permissible. Para 6 of the said judgment being relevant is reproduced below : 6. Proviso (i) to Section 4(1)(a) requires that - "Where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in Cl. (a), be deemed to be the normal price of such goods in relation to each such class of buyers". The learned representative of the department pleaded that the consumer/dealers in the second tier constituted a separate class of buyers and hence t....