1988 (5) TMI 134 - AT - Central Excise

Summary

Issues:
1. Whether service charges claimed as trade discount are admissible for deduction from the sale price.
2. Whether interest on receivables is deductible from the assessable value.

Analysis:

Issue 1:
The appellant, M/s. Seshasayee Paper and Board Ltd., appealed against the disallowance of service charges claimed as trade discount by the Collector (Appeals). The service charges were paid to indentors to procure more indents, but the authorities considered them as brokerage and commission instead of trade discount. The lower authorities rejected the claim for abatement based on these service charges. The Tribunal observed that service charges paid to indentors cannot be construed as a trade discount under the Central Excises and Salt Act, 1944. The Tribunal noted that service charges were not given to the actual buyer of the goods but to the indentor, making them commission paid for procuring orders. The Tribunal emphasized that only non-refundable trade discounts are allowed under Section 4(4)(d)(ii), and since the service charges were not refunded to the manufacturer, they could not be considered as trade discount. The Tribunal referred to relevant judgments to differentiate between commission paid to agents for procuring orders and discounts/commissions given to actual buyers.

Issue 2:
The appellant requested to raise an additional ground of appeal regarding the deduction of interest on receivables. The Tribunal allowed this request, noting that the appellant should be permitted to raise this additional ground for the sake of justice. The Senior Advocate for the appellant argued that interest on receivables should be allowed as a deduction from the assessable value, citing a judgment that supported this claim. The Tribunal agreed with this argument and allowed the appellant's claim for deduction of interest on receivables from the assessable value in principle. The Tribunal directed the appellant to provide details of their claim to the Assistant Collector for verification and allowed the appeal partially, specifically for interest on receivables.

In conclusion, the Tribunal ruled that the service charges claimed by the appellant were not admissible as trade discount and allowed the claim for deduction of interest on receivables from the assessable value. The judgment provides a detailed analysis of the nature of service charges, trade discounts, and the admissibility of various deductions under the Central Excises and Salt Act, 1944.