Holding

The Supreme Court held that the fertilizer is not a mixed fertilizer under the Notification and that the agents' commission is not a trade discount, so both claims fail.

Summary

Coromandel Fertilizers Ltd., a manufacturer of various fertilizers, appointed selling agents (E.I.D. Parry Ltd. and Rallis India Ltd.) who received a 3.5% commission on net realizable value for arranging sales. The company claimed (1) exemption from excise duty on its product Gromor NPK 14‑35‑14 under Notification No. 23/70, asserting it was a "mixed fertilizer", and (2) that the agents' commission was a trade discount deductible from the assessable value under Section 4 of the Central Excise and Salt Act, 1944. Both the Assistant Collector and the Appellate Collector rejected the claims, a decision affirmed by the Andhra Pradesh High Court. The Supreme Court upheld the High Court, holding that the fertilizer did not fall within the definition of "mixed fertilizer" in the Notification and that the commission was remuneration for agency services, not a trade discount, and therefore could not be deducted. The appeals and the related special leave petitions were dismissed.

Issues considered

Whether the fertilizer Gromor NPK 14‑35‑14 qualifies as a "mixed fertilizer" within the meaning of Notification No. 23/70 dated 1‑Mar‑1970, thereby entitling it to exemption from excise duty.
Whether the commission paid to the selling agents constitutes a "trade discount" under the Explanation to Section 4 of the Central Excise and Salt Act, 1944 and is deductible from the assessable value for excise duty.

Legislation cited

Central Excise and Salt Act, 1944s. 4

Subjects

excise dutymixed fertilizerexemptiontrade discountcommissionagency agreementCentral Excise ActNotification

Judgment

523

COROMANDEL FERTILIZERS LIMITED A
v.
UNION OF INDIA AND ORS .
• 17th August, 1984
B
(P,N. BHAG\\'.ATI, R.S. PATHA!ll AND AMARENDRA NATH SEN, JJ.]

' Central Exci'se and Salt Act, 1944, Section 4-Trade discount or
aflowance-Whether Commissions allowed to selling agents under an agreement
are "trade discounts"-Whether the fertilizers manufactured by the appellant
fall within the meaning oj'!mfxedfertillzers" entitling exemption from excise
duty, under Notification No, 23/70 dated ],J,/970,
c
The appe11ant carries on business as manufacturers of diverse kinds of
fertilizers at its factory at Vishakhapatnam. The appellant appointed
M/s E,!D, Parry Limited and M/s Ralli• India Ltd. as their soiling agents
and entered into agreements with them for sale of fertilizers manufactured
by the appe11ant on terms and conditions mentioned in the agreements D
entered into by the appellant with t!)e selling agents. Under the terms
of the agreements the selling agents were appointed by the appellant and
were entrusted with the task of arranging the sale of the fertilizers for and
on behalf of the appellant in consideration of receiving a commission of
, three and a half percent calculated on the net realisable value, that is,
upon the gross sales realisation less excise duty and sales tax, freight
e:i1:pen3es and discount and rebate. This commission is the remuneration E
paid by the app~llant to the selling agents for discharging the obligation
of the selling agents under the agreement of selling the fertilizers. In
the absence of any such agreement the appellant would have been obliged
to carry on the activity of organising the sales of its product on its own.

Based on a Notification issued by the Government of India bearing
No. 23/70 datod 1.3.1970, the appellant, in respect of the the fertilizers F
known as '•Gromor N.P.K. 14-35-14" claimed exemption from the imposi-
tion of exc;se duty, as it is a mixed fertilizers qualifying for exemption.
The appellant also claimed deduction of the seiling agency c<>mmission paid
,, to its selling agents for sale of fertilizers manufactured by it as trade discount
in the matter of computation of excise duty payable on. the fertilizers manu-
factured by the appellant. The claims on both these accounts were
disallowed by the Assista'lt Collector whose decisions were upheld by the G
Appeilate Co1lector. Aggrieved by the decisions of the authorities concerned,
the appellant filed Writ Petitions in the High Court. The High Court by
its common judgment refused to entertain the claims of the appellant
under these two heads and dismissed aU- the Writ Petitions filed by the
appellant in the High Court. Hence the appeals with Special Leave
~ranted by this Court. H
524 SUPREME COURT REPORTS [1985] I s.c.R.

A Dismissing the appeals, the Court

HELD : 1 : I. The fertilizers manufactured by the appellant in
respect of which a claim for exemption under the Notification No. 23 of
1970 dated 1.3.1970 is made, is not mixed fertilizers \vithia the meaning
and seope of the Notification, since the process of manufacture of N.P.K.
B 14-35-14 brings into existence several other substances and once again
utilises them in the process treating one substance wit.h the other. (5 32B-C] •
1 : 2. The Explanation added to the No_t.ification also forms a part
of the Notification itself, The notification has to be construed as a whole
and in properly interpreting the Notification, the Ex.plaaatioa which has

c
brcn added to the Notification cannot be ignored. The question as to
whether the Explan1tion seeks to control the operation or the effect
of the Notification is indeed immaterial, as the Explanation purports neither
to control nor to alter but only seeks to explain. What the Explanation
'
provides is not in any way in conflict with or contrary to what the Noti·
fication provides. [53 IG-H]

1 : 3. A wrong decision by the Excise Authorities in favour of any
D
particular party allowing the benefit of the Notification under similar
circumstances to a rival company does not entitle any other party to claim
benefits on the basis of that wrong decision. [532B]

2 : 1. The amount of comm1ss1on paid to the selling agents is
not a trade discount within the meaning of the Explanation to Section
E 4 of the Central Excise and Salt Act, 1944 and does not qualify for
deduction in determination of the assessable value of the goods for the \
~urpose of imposition of excise duty, though it is possible that in a given
case, payment of what is termed as comn1ission may, depending on the
facts and circumstances of the case be in the nature of trade allowance.
,
But every kind of trade allowance does not necessarily qualify for deduc.
tion in assessment of excise duty. Here the agreements make it clear
F that the commission paid to the selling agents is not a trade discount
given either to the wholesale buyer or to the ret1il buye~. It is not given
to the consumer or the trader. The commission paid 011 the basis of
the agreement to the selling agents 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. [534F-H; 535A]
G
M.C.V.S. Arunachala Nadar Etc. v. The State of Madras and Ors.
[1959] Suppl. 1 SCR 92; In Re: Licenced Vict,.a/lers' Mutual Trading
.Associatlon Exparte Audaz'n [1889] (42) Law Reports Chencery Division I;
discussed and held inapplicable.

CIVIL APPELLATE JURiSDICTION ; Civil Appeal Nos. 1373 to
fl 1376 ofl976.
COROMANDEL LTD. v. UNION (A. N. Sen, J.) 525

Appeals by Special leave from )he judgment and Order dated A
the 24th Sept amber, 1976 of the Andhra Pradesh High Court in
Writ Petition Nos. 1400 to 1403 of 1976.

AND

Civil Appeal Nos. 633-686/77, 1062-1064 of 1977, 885 to 89J B
• of 1978 .

From the Judgment and Order dated the 31st Day of January,
1977 of the Andhra Pradesh High Court in Writ Petition Nos.
2898, 2940, 2946, 2948, 2899, 2900, 2904, 2901. 2902, 2903, 2941
2947 and 296! of 1976. c
Ravinder Narain; O.C. Mathur, Talat Ansari, Kamal Mehta
and Ms. Rainu Wal/ia for the Appellant. -

Ms. A. Subhashini and Girish Chandra for the Respondent.
D
The Judgment of the Court was delivered by

AMARENDRA NATH SEN, J. These appeals and also the Special
Leave Petitions arise' out Writ Petitions filed by the Appellant as
the petitioners in the High Court of Judicature, Andhra Pradesh at E
) Hyderabad. The High Court disposed of all the writ petition•: by
one common judgment. For reasons stated in the judgment the
High Court dismissed all the writ petitions. This Court granted
special leave to the appellant to file appeals against the dismissal
of the writ petitions by the High Court and also directed some of
the Special Leave Petitions to be heard along with the appeals. F
As all the writ petitions were dismissed by one common judgment
• delivered by the High Court, we propose to dispose of all these
matters by this judgment.

Two questions fall for determination in these appeals. lhe
first question is whether on a true construction of the Notification G
No. 23/70 dated 1.3.1970 issued by the Government of India, the
apellant is entitled to claim exemption from the imposition of
excise duty on fertilizers which, according to the appellant, are
mixed fertilizers m~nufactured by the appellant. The other question
is whether the amount of commission paid by the appellant to its
selling agents should be deducted as trade allowance in computing
tbe value. of the goods for as,sessment of excise duty. H
526 SUPRllM!l COURT RBPORTS (1985] l s.c.R.

A It may be noted that some of these appeals are concerned with
the first question, namely the exemption under the Notification No.
23/70 dated 1.3.1970, and in the remaining appeals the question of
exclusion of the commission paid to the selling agent is involved.
Same questions are involved in the special leave petitions.

The broad facts about which there does not appear to be any
B serious dispute may be briefly noticed. •
The appellant carries on business as manufacturers of diverse
kinds of fertilizers at the factory situated at Vishakhapatnam. The
t ...
c
appellant considered that it would be advisable to entrust the sale
of its products to organisations with experience in the sale of ferti-
lizers, instead of the appellant itself organising sales of the fertilizers
•
mannfactured. Accordingly, the appellant appointed Mfs. E.I.D.
Parry Limited and M/s. Rallis India Ltd, as their selling agents and
entered into agreements with them for sale of fertilizers manufac-
tured by the appellant on terms and conditions mentioned in the
D 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 s1le of the fertilisers for and on behalf of the
appellant in consideration of receiving a commission of 3!%
calcul•ted on the net realisable value, i.e., upon the gross sales
E realisation less excise duty and sales tax, freight expenses 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
F II
been obliged to carry on the activity of organising the sales of its (

products on its own. • "'
The Central Government issued a notification bearing No.
25/70 dated 1.3.70 which reads as follows :-

"In exercise of the powers conferred by sub-rule (!)
G
of rule 8 of the Central Excise Rules, 1944, the Central
Government hereby exempts mixed fertilizers, falling under
item No. 14HH of the First Schedule to the Central Excises
and Salt Act, 1944 (I of 1944) manufactured with the
aid of power, from two or more fertilizers on all of which
the appropriate amount of the duty of excise or, as the case
ff may be, the iidditional duty under section. 2 A of the Indian
COROMANDEL LTD. v. UNION (A. N. Sen, J.) 527
A
TarrifAct, 1943 (32 of 1934), has already been paid, from
the whole of the duty of excise !eviable thereon.
' '
Explanation : For the purpose of this notifkation;
the term 'mixed fertilizers' means mixtures of fertilizers
containing more than one nutrient(nitroge~, phosp,hate B
or potash) and does not include single nutrient fertilizers
• like super phosphate manu-factured from rock phosphate."

On the basis of this notification the appellant had asked for
exemption from the imposition of excise duty on fertilisers manufac-
tured by it, claiming such fertilisers tel be mixed fertilisers within c
the meaning of this Notification. The appellant bad also claimed
deduction of the selling agency commission paid by the appellant
to its selling agents for sale of the fertilisers manufactured by the
appellant as trade discount in the n1atter of coinputation of excise
_ duty payable on the fertiFscrs manufactured by the appellant. The
claim< on both these accounts were disal!owed bv the Assistant D
Collector whose dOcisions were upheld by the Appellate Collector.
Ag~rie".ed hy the decisions of the authorities coP.cerned, the appel-
lant filed writ petitions in the High Court. As we. have earlier
observed, the. High Court by its common judgment refused to
entertain the claims of the appellant under these two heads and
dismissed all the writ petitions filed bv the appellant in the High E
Court.. Against the decision and j~dgment of the High Court
'disallowing these claims these appeals with special leave granted by
this Court have been filed by the appellant.

' The case of the appellant in support of its claim for exemption
under the Notification may be indicated. The claim is made in F
respect of the Fertiliser known as 'Gromor N.PX. 14-35-14' which,
l according to the appellant, is a mixed fertiliser qualifying for relief
under the Notification. The petitioner makes the case that Gromor
N.P.K. 14-35-14 is manufactured with the aid of power mixing two
imported fertilisers, namely, Rock Phosphate and Muriate of Potash
on which the appellant had paid proper duty. The manufacturing G
process of the said fertiliser comists of treating Rock Phosphate
with Sulpuric Acid wh•ch produces Phosphoric Acid. When such
Phosphoric Acid is treated wilh Ammonia, Mono and Di-Ammo-
nium Phosphate in Slurry form comes into existence. To this slurry,
, Muriate of Potash is added. Thereafter the said mixed fertiliser
~orrles' into existence. During the said process, a small quantity
1

of Ammonium Sulphat~ is formed, but it is neither possible to
528 SUPREME COURT REPORTS (1985] l s.c.R.

A separate it nor is it possible to use it, as it is mixed with the other
ingredients. According to the appellant, Mono and Bi-Ammonium
Phosphate in Slttrry form cannot be used as fertilisers for the reason
that they are highly concentrated and in Slurry Form. The conten·
tion 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
B 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 the language usod in the Notification this fertiliser clearly
c comes within the ambit of tho Notiftc•tion and satisfies all the
requirement; laid down in the Notification for exemption under the
said Notification. Mr. Setalvad argues that the explanation added
to the Notification cannot control or in any way affect the·plain
language used in the Notification. It is his argument that taxing
statutes and rules and notifications issued thereunder will have to
D be construed and understood with reference to. the language used
therein and there is no scope for speculation about the true intention
or for trying to gather the true intention otherwise than by inter·
preting the language used therein. Mr. Setalvad has further
commented that the Trade Notice issued by the Government in
November, 1974, purporting to qualify the Notification by seeking
E to lay down that the exemption only applied to physical mixture
of duty paid fertilisers and not to mixed fertiliser produced as a
result of Chemical reaction, is of no material consequence. It is
his comment that the exemption granted under ·the Notification
cannot in any way be curtailed or taken away or otherwise affected!
by the issue of a Trade Notice purporting to qualify the meaning
F and scope of the Notification and the right of any party entitled to
the benefit under the Notification cannot be taken away by any purf'
ported clarification of the Notification without amending the Notifica·
tion itself.

It may be noted that before the High Court the very same
contention was raised and the very same argnments were advanced.
G
The High Court has elaborately and very carefully considered the ,'
case made for exemption under the Notification and the arguments
advanced in support thereof. On a careful and proper consideration
'
of the contention raised and the arguments advance<', the High
Court, in our view, rightly disallowed the claim for exemption and
rejected the argnments advanced. While declining to entertain
the claim in this respect the High Court held :
COROMANDEL LTD. v. UNiON (A. N. Sen, J.) 529

"What is exempted .is 'Mixed fertilisers' falling nnder A
item No. 14HH of the First Schedule to the Act. Item
!4HH refers to 'fertilisers, all sorts, but excluding natural,
animal or vegetable fertilisers when not chemically treated'.
It is, therefore, manifest that the notification is concerned
with only 'fertilisers' and not with any other commodity.
B
This idea is further demonstrated from the word 'manufac-
• tured ......... from two or more fertilisers'. So, it follows
that a mixed fertiliser, in order to win the exemption from
ditty, 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
c
exemption would be available only to mixtures 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 meanmg of
the notification as purporting to grant exemption only to D
mi~ed fertilisers manufactured from two or more fertilisers.
It is not its purpose to grant exemption to mixtures of
fertilisers and other commodities as well.

1 Shri Setalvad for the petitioner company strongly urged
that if two or more fertilisers are used in the manufacture E-
of mixed fertilisers, such fertilisers would be entitled to
exemption dispite the use of other commodities like Sulphu-
ric Acid and Ammonia. According to him, what all the
notification requires is the use of two or more fertilisers in
the manufacture of mixed fertilisers and it does not matter
if, in addition to two or more fertilisers, some other F
commodities are also used. He also pointed out that had
the Government of India wanted to limit the exemption in
the manner in which the learned Government Pleader
construed, then it would have used the word 'only' before
'two or more fertilisers'. Since that word does not occur,
the exempt' on would be available even if other commo-
G
dities are used. If that were the intention of the notifica·
tion, then it could have easily said 'manufactured from two
or more fertilisers or other substances', Not only it omitted
to say that, but on the other hand the notification through-
out emphasises on the use of fertilisers and fertilisers alone.
The· absence of the word 'only' before 'two or more ferti-
rlises' does not stand in the way of understanding the real
530 SUPREME COURT REPORTS [1985] 1 S.C.R.

A intention of the Government -of India. To our mind,
conseque.ntly, the true and natural meaning of the notifica-
tion is that the exemption is available to mixed fertilisers
alone. If other comn\odities are also used in manufacturing
the mixed fertilisers, then the sai<\ mixed fertiliser walks out
of the exemption."
B
The High Court bas further observed :- •

"We have already noted the averments in paragraph 8
of the writ petition describing the process of manufacture
c of NPK 14 : 35 : 14 and the fertilisers and commodities
used therein. The petitioner company itself stated that
NPK 14: 3S: 14 is manufactured by mixing with the aid
'
of power from two imported fertilisers viz. Rock Phosphate
and Muriate of Potash. The Manufacturing process,
according to the averments in the writ petitions consists of
D treating Rock Phosphate with Sulphuric Acid, which treat-
ment produces Phosphoric Acid. The Phosphoric Acid
that is thus produced' is further treated with Ammoni~ as a
consequence of which Mono and Di-Ammonium Phosphate
in slurry form comes into existence. Let us not think at
the present of the Phosphoric Acid and Mono and Di-
E Ammonium phosphate which come into existence in the
process of manufacture. Let u; concentrate on the basic
commodities used in the manufacture of this fertiliser.
From the averments in paragraph 8 of the writ petition it is
9bvious that not only the two fertilisers i.e., Rock Phos-
phate and Muriate of Potash are used, but also Sulphuric
F Acid and Ammonia are used. The Sulphuric Acid and
Ammonia used in the manufocture of NPK 14: 35: 14 are •
not created in the process of manufacture. They are
brought from outside and utilised in the process of npnu·
facture ju;t like the two fertilisers Rock Phosphate and
Muriate of Potash. This much is evident from paragraph
8 of the writ petition.
G
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
14HH which is under the heading 'gases', is a gas, Sulphuric
H Acid and Ammonia are independent commodities which
531
... COROMANDEL LTD. v. UNION (A. N. Sen, J.)

A
are by tlicmselves eligible t'.' excise duty. Jn con-
trast when we come to item l ·1 HI-I in the first schedule,
it de~ls only with 'fertilise.rs'. Tt purports to deal with
fertilisers of all sorts excluding natural, animal or vegetable
fertiliset'S, when not chemicaly treated. It gives a number
of commodities which arc treated, under law, as fertilisers. II
Entry 3 of item 14HH contains the words which the noti- B
fication 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, inclu-
. ding mixed fertilisers, on one hand and acids like Sulphuric
Acid and gases like Ammonia is pointed out and main-
tained, it is futile to argue that notification No. 25/70 grants
c
exemption to mixed fertilisers which are manufactured
from two or more fertilisers and acids and gases. To say
that is only to introduce something which is not in the noti-
fication. We are, therefore, of the view that Gromor NPK
14 : 35 : 14 is not within the exemption given under the
notification".

We entirely agree with the view expressed by the High Court.
We may also note that the High Court has further aptly pointed
out :
E
''.The process of manufacture of NPK 14 : 35: 14, bring-
ing into existence several other, substances, and once again
utilising them in the process, (reatrng one substance with
the other, cannot be said to be mixture of fertilisers as
postulated by the notification. So, it will have to be held
F
that NPK 14 : 35 : 14 is no't entitled to exemption under
notification No. 25/70."
•
It has to be borne in mind that the Explanation added to ·the
Notification also forms a part of the Notification itself. The Noti-
fication has to be construed as a whole and in properly interpreting
}
the Notification, the Explanation which has been added to the G
Notification cannot be ignored. The question as to whether the
Explanation seeks to control the operation or the effect of the Noti-
lication is indeed immaterial, as the Explanation purports neither to
control nor to alter but only seeks to explain. What the Explanation
provides is not in any way in conflict with or contrary to what the
Notification provides.
H
532 SliPREMS COURT REPORTS (198S) l s.C.I!.

A Mr. Setalvad made a grievance that the authorities concerned
had allowed the benefit of the Notification under similar circum-
stances to a rival company. If the grievance of the appellant is \
true, the appellant may no doubt have reasons to feel sore about
it. We have, however, to point out that the grievance of the
appelbnt even if it is well founded, does not entitle the appellant
B to'claim the benefit of the Notification. A wrong decision in
favonr of any particular party does not entitle any other party to
claim the beneftt on the basis of the wro.ig decision. We are, there-
fore, clearly of the opinion that the fertiliser manufactured by the
appellant in respect of which claim for exemption under the Noti-
fication is made is not a mixed fertiliser within the meaning and
c scope of the Notification 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.
'
The other question raised on behalf of the appellant relates to
D the appellant's claim for deduction of the commission ·paid to the
selling agents from the assessable value of the goods ir anufactured
in the matter of computation of the excise duty. (The agreements
which the appellant had witi1 the selling agents clearly go to indicate
that the selling agents who were jieing appointed were the agents of
the appellant for sale of fertilisers on behalf of the appellant. The
E agreement clearly provides that the selling agents will secure orde.rs
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 agreemer.t between the parties.
F , 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 the basis of the terms and conditions
stipulated in the agreement.) Clause 2 (a) of the agreement dated
April I, 1971 with M/s. Rallis India Limited which deals with the
question of appointment clearly states:-
G
L
"Coromandel hereby appoints the agent as one of
Coromandel Sales Agents for sale and distribution on behalf
of Co roman de! of the product in the territory ...... ".

The commission which is paid by the appellant to the selling
H agents is for services rendered by them as such agents. Such com- 1•
COROMANDEL LTD. v. UNION (A. N. Sen, J.) 533

mission paid to agents for services rendered cannot be considered .\
to be in the natnre of any trade discount which may qualify for
deduction in determining the assessable value of the goods for the
purpose of imposition of excise duty-under the Central Excise and
Salt A:t, 1944.
/
The decision of this Court in the case of M.C V.S. Arunacha/a B
Nadar etc. v. The State of Madras and Ors. (1 ) and the decision
• of the Court of Appeal in England ln Rclicenced Victuallers' Mutual
Trading Association Exparte Audain(2) relied on by Mr. Setalvad are
not of any assistance in deciding the question in the present case.
c
In the case of M. C. V. S. Arunac/ia/a Nadar Etc. v. The State
of Madras and Ors. (Supra) this Co:ut was concerned with the
question of constitutional val 'dity of the Madras Commercial Crops
Markets Act (Madras XX of 1933), the rules framed thereunder and
also certain notifications issued in parsuance thereof. Bye-law 25
de,lt with "Trade allowance applying to the market and notified D
area". While considermg the nature of trade allowance this Court
observed at page 109 :

"What is a trade allowance ? Trade involves exchange
of commodities for money, the business of buying and
selling and the transaction involves the seller, the buyer, E
the commodity sold and the price paid for the sale. Allow-
ance means something given as compensation, rebate or
deduction. Under the section, the said deduction should be
in any transaction in respect of con1mercial crops. The-
deduction may be out of the commodity or out of the price.
The recipient may be the seller, the buyer or a third party. F
When A sells a quantity of cotton to B for a hundred
rupees, B, the purchaser, may deduct one rupee from the
• sale price and pay ninety nine rupees to A, he may keep
that amount for himself, or pay the same to C. So too, A,
the seller,· may purport to sell one maund of cotton but in
fact deduct a small part of it, retaio that part for himself or G
give it to C; or both A and B may fix the price of the com-
modity 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

(I) (1959] Suppl. I S.C.R. 92.
U) [1SB9] (42) Law Reports Chancery Division I. H
534 SUPREME COURT REP 6 RTS (1985) ! S.C.Il.

A C a specified amount as consideratian for the user 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
B
be paid or transferred, it would be a trade allowance. On
the other hand, if the payment is de hors the terms of the .•
transaction but made towards consideration for the use of
tl1e premises or services rendered, it would not be a deduc-
tion rrom the price or in any transaction."
C.
These observations were made in the context of the provisions
of 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 th1t in tho instant case, there is no sale by the
appellant to the agonts to whom th~ commission is paid by way of
D remuneration for services rendered as agents of the appellant.

Jn the case of Relicenced Victuallers' Mutual Trading AsiOcia-
tion Exparte Audain (supra), the Court of Appeal in England on a
construction of the agreem,nt observed that the word discount in
the agreement must be construed as commission so that the agree-
E ment was not one to issue shares at a discount.

It is possible that in a given case, payment of what is termed
as commission may, depending on the facts and circumstances of
the case be in the nature of trade allowance, But every kind of
trade allowance does not necessarily qualify for deduction in assess-
F ment of excise duty. CommiS>ion 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 computa-
tion of the assessable value of .the goods for the purpose of levy of
G exciee duty. The commission paid to the selling agents is not a l
trade discount given either to the wholesale buyer or to the retail
buyer. It is not given to the consumer or the trader. The commi-
ssion 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 p1yable or paid
H at the time of removal of the goods from the factory or any other
COROMANOEL LTD. v. ONION (A. N. Sen, j,) 535

premises of manufacture or production for delivery at the place of A
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 view the High Court was clearly
justified in rejecting this claim of the appellant.
B
• Both the claims made by the appellant, therefore, fail and
have been rightly rejected by the High Court. We, accordingly,
dismiss the appeals as also the Special Leave Petitions. We, how-
ever, propose to make no order as to costs.

S.R. Appeal dismissed.

•