TMI Blog2006 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... order of Commissioner (Appeals); the original authority and held that the commission paid by M/s. DCM Textiles, the respondent herein, to its dealers was deductible 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent to the dealers was on 'principal to principal basis' and the commission paid to the dealers was in the nature of trade discount and the respondent-assessee was 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may issue the sale invoice in dealer's favour. In such event, terms of cash discount/interest free period and interest recoverable shall start from the date of sale invoice itself. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to a trade discount provided the sale is from 'principal to principal basis'. It was further observed that such trade discount shall not be disallowed only because they are not 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 thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dealers to retire the bills for the purpose of taking delivery of the mopeds. Clause 5(b) of the agreement laid an obligation on the dealers to insure the mopeds against all risks, 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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