TMI Blog1984 (8) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... with the reasons stated in the judgment of the High Court. Commission paid to an agent for services rendered by him in the matter of sale of the product of the appellant on behalf of the appellant on the basis of the agreement the appellant had with its selling agents cannot be considered to be in the nature of such trade discount as may qualify for deduction in the computation of the assessable value of the goods for the purpose of levy of excise duty. The commission paid to the selling agents is not a trade discount given either to the wholesale buyer or to the retail buyer, it is not given to the consumer or the trader. The commission paid on the basis of the agreement to the selling agent by way of remuneration for services rendered by the agent cannot by any process of reasoning be said to be trade discount payable or paid at the time of removal of the goods from the factory or any other premises of manufacture or production for delivery at the place of manufacture or production. The amount of commission paid to the selling agents, therefore, is not trade discount within the meaning of the Explanation to section 4 of the Act and does not qualify for any deduction. In our vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry Limited and M/s. Rallis India Ltd., as their selling agents and entered into agreements with them for sale of fertilizers manufactured by the appellant on terms and conditions mentioned in the agreements entered into by the appellant with the selling agents. Under the terms of the agreements the selling agents were appointed by the appellant and the selling agents were entrusted with the task of arranging the sale of the fertilisers for and on behalf of the appellant in consideration of receiving a commission of 31/2 % calculated on the net realisable value, i.e., upon the gross sales realisation less excise duty and sales tax, freight enpenses and discount and rebate. This commission is the remuneration paid by the appellant to the selling agents for discharging the obligation of the selling agents under the agreement of selling the fertilisers. In the absence of any such agreement the appellant would have been obliged to carry on the activity of organising the sales of its products on its own. 5. The Central Government issued a notification bearing No. 25/70, dated 1-3-1970 which reads as follows :- "In exercise of the powers conferred by sub-rule (1) of rule 8 of the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Muriate of Potash on which the appellant had paid proper duty. The manufacturing process of the said fertiliser consists of treating Rock Phosphate with Sulphuric Acid which produces Phosphoric Acid. When such Phosphoric Acid is treated with Ammonia, Mono and Di-Ammonium Phosphate in Slurry form comes into existence. To this slurry, Muriate of Potash is added. Thereafter the said mixed fertiliser comes into existence. Daring the said process, a small quantity of Ammonium Sulphate is formed; but it is neither possible to separate it nor is it possible to use it, as it is mixed with the other ingredients. According to the appellant, Mono and Di-Ammonium Phosphate in Slurry form cannot be used as fertilisers for the reason that they are highly concentrated and in Slurry form. The contention is that since Gromor N.P.K. 14:35:14 is manufactured with the aid of power from the two fertilisers, it qualifies for exemption under the Notification. In support of the contention that the fertiliser Gromor N.P.K. 14:35:14 comes within the scope of the exemption under the notification, Mr. Setalvad, the learned Counsel appearing on behalf of the appellant, has argued that on a plain reading of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated from the word 'manufactured.... from two or more fertilisers'. So, it follows that a mixed fertiliser, in order to win the exemption from duty, should be one which has been manufactured from two or more fertilisers. When the notification once again used the word 'fertilisers' its intention to emphasise that the exemption would be available only to mixture of fertilisers becomes patent. This meaning is further made clearer by the Explanation which gives the meaning of the term 'mixed fertilisers' as 'mixtures of fertilisers'. Therefore, there cannot be any hesitation to understand the meaning of the notification as purporting to grant exemption only to mixed fertilisers manufactured from two or more fertilisers. Its not its purpose to grant exemption to mixtures of fertilisers and other commodities as well. Shri Setalvad for the petitioner company strongly urged that if two or more fertilisers are used in the manufacture of mixed fertilisers, such fertilisers would be entitled to exemption despite the use of other commodities like Sulphuric Acid and Ammonia. According to him, what all the notification requires is the use of two or more fertilisers in the manufacture of mixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 35 : 14 are not created in the process of manufacture. They are brought from outside and utilised in the process of manufacture just like the two fertilisers Rock Phosphate and Muriate of Potash. This much is evident from paragraph 8 of the writ petition. Undoubtedly Sulphuric Acid is an acid. That can be seen not only from the very name it has, but also from the list of acids given in Item 14-G of the First Schedule under the head 'acids'. Ammonia, as can be seen from Item 14H which is under the heading 'gases', is a gas. Sulphuric Acid and Ammonia are independent commodities which are by themselves eligible to excise duty. In contrast, when we come to Item 14HH in the First Schedule, it deals only with 'fertiliser'. It purports to deal with fertilisers of all sorts excluding natural, animal or vegetable fertilisers, when not chemically treated. It gives a number of commodities which are treated, under law, as fertilisers. Entry 3 of Item 14HH contains the words which the notification used. It deals with mixed fertilisers manufactured with the aid of power from two or more fertilisers. When in the Act itself this distinction between fertilisers, including mixed fertilisers, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and we have no hesitation in rejecting the case of the appellant, expressing our agreement with the reasons stated in the judgment of the High Court. 12. The other question raised on behalf of the appellant relates to the appellant's claim for deduction of the commission paid to the selling agents from the assessable value of the goods manufactured in the matter of computation of the excise duty. The agreements which the appellant had with the selling agents clearly go to indicate that the selling agents who were being appointed were the agents of the appellant for sale of fertilisers on behalf of the appellant. The agreement clearly provides that the selling agents will secure orders on behalf of the appellant, execute such orders on behalf of the appellant and will also remain liable to-the appellant for realisation of the price of goods sold to various parties; and for such services rendered by the selling agents, the selling agents will be entitled to the commission stipulated in the agreement between the parties. The agreement is essentially an agency agreement and the selling agents were being appointed as agents for sale and distribution of the product of the appellant on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e seller, may purport to sell one maund of cotton but in fact deduct a small part of it, retain that part for himself or give it to C; or both A and B may fix the price of the commodity purchased at Rs. 102 but the purchaser pays one rupee to C; or it may be that payments have nothing to do with the price or the transaction, but both the parties pay C a specified amount as consideration for the use of the premises or for the services rendered by him. The question whether a particular payment is a trade allowance or not, depends upon the facts of each case. Firstly, it must be a deduction in any transaction in respect of commercial crops. If it is deduction out of the price or commodity agreed to be paid or transferred, it would be a trade allowance. On the other hand, if the payment is de hores the terms of the transaction but made towards consideration for the use of the premises or services rendered, it would not be a deduction from the price or in any transaction." 16. These observations were made in the context of the provisions 01 the Act and while construing the same. They are of no assistance in considering the question raised in the present case. It may further be noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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