TMI Blog1995 (12) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance of cost of wooden crates. The department being aggrieved has filed an appeal in regard to the trade discount and the cash discount, while the manufacturer has filed an appeal regarding the disallowance of cost of wooden crates. 2. We have heard the learned counsel appearing for the manufacturer and the Senior Departmental Representative. The following questions arise for consideration :- (I) Whether cash discount of is allowable? (II) Whether deduction of 3% trade discount granted to wholesalers in regard to goods directly sold to sub-dealers is allowable? (III) Whether deduction for cost of wooden crates is al POINT NO. I 3. The price lists declared that cash discount of would be granted to customers who pay the price in cash within seven days of the sale. The Collector (Appeals) allowed the reduction of price list price by irrespective of whether customers actually availed the discount or not. The revenue contends that this deduction could have been allowed only to the extent to which it was actually granted to customers who availed the discount and the price generally could not be depressed to this extent. Reliance is placed on the decision of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate authority allowed deduction of this 3% which is now in dispute. 5. Shri Vipin Handa, Senior Departmental Representative, calls this 3% discount as overriding commission and points out that the manufacturer in its letter dated 12-11-1986 addressed to the Asstt. Commissioner had also called it commission. He, therefore, contended that the objected 3% allowance is really commission and not trade discount and could not be deducted from the recommended price referred to in the price list. 6. In terms of the agreement and the trade pattern, it is clear that the relationship between the manufacturer and the wholesalers and the manufacturers and the sub-dealers, respectively, was on principal to principal basis and there were actual sales to the wholesaler or the sub-dealer as the case may be, and the wholesaler did not act as agent of the manufacturer for the purpose of effecting sale to sub-dealers. That the manufacturer at one stage referred to the 3% allowance as commission is not determinative since it is not the form but the substance which matters. In a similar situation, the Supreme Court in Moped India Ltd. v. Asstt. Collector of Central Excise, Nellore Othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no material to show that the higher discount was given to meet sale promotion expenses or that the wholesaler dealers were acting as commission agents. The Tribunal observed that It is not unknown in the trade that in some cases the wholesale dealers direct certain sales to be made directly to ultimate consumers or sub-dealers on commission basis. The Tribunal finally held that what was paid to the wholesalers was really in the nature of trade discount deductible for the purpose of valuation. This decision was challenged by the revenue before the Supreme Court by way of an appeal which was dismissed on merits as reported in 1991 (54) E.L.T. A92 (SC). This decision was approved and followed by the Tribunal in Sandoz India Ltd. v. Collector of Central Excise, 1992 (60) E.L.T. 624 (Tribunal), where it was observed as follows :- Therefore, as long as the discounts are made known prior to the removal of the goods, they are admissible deductions and, the facts of this case disclose that the discounts were declared in the price lists .....The fact that a part of the discount was given to the customer and the balance to the stockists as an overriding commission, does not, in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are packed in wooden cases [and] are sold to wholesaler at the factory gate, it means that goods are capable of being sold and are actually so sold to wholesaler at the factory gate and as such packing in wooden cases is not necessary . Learned counsel also contended that wooden cases are used to pack goods which are sent to dealers at distant places for the purpose of safeguarding the goods and preventing damage to the goods during their long journey. The counsel relied on the decisions in Union of India Others v. Godfrey Philips India Ltd. Others, 1985 (22) E.L.T. 306 (S.C.), Collector of Central Excise v. Pond s India Ltd., 1989 (44) E.L.T. 185 (S.C.), Panyam Cements Mineral Industries Ltd. v. C.C.E,. Madras, 1984 (18) E.L.T. 614, Hindustan Lever Ltd. v. Collector of Central Excise, 1991 (54) E.L.T. 420 (Tribunal), Chitavalasah Jute Mills v. Collector of Central Excise, 1989 (39) E.L.T. 157A (Tribunal) and Collector of Central Excise v. Blue Star Ltd., 1992 (59) E.L.T. 540 (Tribunal). Senior Departmental Representative rebutted the submissions and contended that the Supreme Court in Government of India v. Madras Rubber Factory Ltd., 1995 (77) E.L.T. 433 (S.C.) has conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at the factory gate and if they are generally sold in the wholesale market at the factory gate in certain packed condition whatever may be the reason for such packing, the cost of such packing would be includible in the value of the goods for assessment to excise duty. The other judgment indicated that one should go by the conduct of the parties and the nature of the packing in which the goods generally are - not, can be - placed in the wholesale market and what was the condition of packing considered by the manufacturers, having regard to the nature of the business, the type of goods concerned, the unit of sale in the wholesale market and other relevant considerations, to be generally necessary for placing the goods for sale in the wholesale market at the factory gate. The Supreme Court in Madras Rubber Factory Ltd. case approved the tests evolved in both the judgments in Pond s India Ltd. case which are the same in essence and are consisent with the conditions evolved in Bombay Tyre International. The court also agreed with the understanding of Ranganathan, J. of the majority opinion in Godfrey Philips India Ltd. and the opinion in Geep Industrial Syndicate. 13. The Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submissions ignore the crucial expressions in Section 4(1)(a) of the Act, namely, price at which such goods are ordinarily sold. If one sale or a few sales are effected to wholesalers at the factory gate of goods packed in corrugated cases and not packed in wooden boxes, it cannot be said that the goods are ordinarily sold in such packing to the wholesalers at the factory gate. Considering the sale pattern of the manufacturer in this case, going by the percentage of sales, it has to be held that ordinary sale is of goods packed in corrugated cartons which are in turn packed in wooden cases. In other words, generally speaking it is only in that condition of packing that goods are ordinarily sold in the wholesale trade at the factory gate and from this perspective, it has to be stated that packing in wooden boxes is necessary to make the goods marketable in the wholesale trade at the factory gate. The purpose of using wooden boxes as indicated by the manufacturer is that they are necessary to protect the goods from damage during long transit. This, of course, is not a directly relevant test. Its importance is only to contradict the stand of the department that such packing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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