TaxTMI 
TaxTMI 
2006 (2) TMI 3
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble as a trade discount for the purposes of computing assessable value of cotton yarn. Facts : 2.During the scrutiny of records for finalization of provisional assessment the authorities observed that deduction claimed in respect of the commission paid to its dealers by the respondent was not permissible as the appointed dealers were the selling agents and not the dealers. Accordingly, show cause notice dated 6-11-1996 was issued calling upon the respondent-assessee to debit the differential duty. The assessee submitted its reply and disputed the revenue's stand and submitted that the commission paid to the dealers was deductible being a trade discount for computing assessable value of the cotton yarn. 3.The Assistant Commissioner confi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entitled to deduct the same while calculating the net assessable value. 6.Revenue, being aggrieved, has filed the present appeal. 7.Counsel for the parties have been heard at length. 8.Respondent has entered into different but similar agreements with its dealers in connection with the sale of cotton yarn manufactured by it and one of the agreement was produced during the course of proceedings before the original authority for the purposes of ascertaining the terms and conditions at which the goods were supplied by the respondent to its dealers. The agreement purports to be a dealership agreement. The relevant clauses of the agreement are reproduced hereunder: "2. That the Cotton Yarn will be delivered to the dealer on his requisitions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tself. 13.That the dealer shall keep with the company a security deposit of Rs. 50,000/- as security which shall carry on interest of 15% per annum which will be payable yearly. 16.If at any time this agreement is terminated in accordance with the conditions of this agreement, the accounts shall be finalised and settled within one week from the date of its termination." 9.A bare perusal of the above-noted clauses clearly shows that the agreement entered into between the respondent and dealers was on 'principal to principal basis' and it was an absolute sale made by the respondent in favour of the dealers. The dealer is required to make full payment of the cotton yarn purchased by him forthwith and he is given half per cent cash discount ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....payable at the time of each invoice or deducted from the invoice value. 12.Original authority as well as Commissioner (Appeals) had stressed upon the point that since the trade discount was not paid to the dealer at the time of the preparation of the invoice and was to be paid later based on the net sale value of the sale effected (½ per cent of the net sale value); that the agreement between the parties amounting to be an agency agreement and not the dealership agreement and the sale was not from principal to principal basis. We agree with the Tribunal that this view is not sustainable of the facts of the case. 13.This Court in Moped India Limited v. Assistant Collector of Central Excise Nellore and Others reported in (1986) 1 SCC 125, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isks, pilferage, non-delivery and SRCC including breakage from the time the mopeds left the factory or stock-yard of the appellants until they arrived at the premises of the dealer and this again would show that the dealers acted as principal to principal in purchasing the mopeds from the appellants. The dealers were also liable under Clause 6 of the agreement to maintain adequate organization for sale and service of the mopeds, including shows room, service stations, repair shops, spare parts, salesman, etc. and the mechanics were also to be trained at the cost of the dealer. The relationship between the appellants and the dealers was clearly on principal to principal basis and in the circumstances it is difficult to see how the the amount....