SESHASAYEE PAPER & BOARDS LIMITED, ERODEversusCOLLECTOR OF CENTRAL EXCISE, COIMBATORE

         SESHASAYEE PAPER & BOARDS LIMITED, ERODE
A
                                          v.
         COLLECTOR OF CENTRAL EXCISE, COIMBATORE

                              FEBRUARY 13, 1990

B                   [M.H. KANIA AND J.S. VERMA, JJ.]

           Central Excises and Salt Act, 1944/Central Excise Rules, 1944:
     Section 4 and First Schedule Tariff Item N2· 17-Excise duty-Levy
     of-Paper and paper boards manufactured by assessee-'Trade dis-
     count' and 'service charf{e discount'-Permissibility.
c           The appellant who was engaged in the mannfacture of paper and
     paper boards which were assessable under Tariff Item No. 17 of the First
     Schedule to the Central Excises and Salt Act, 1944, engaged several
     dealers referred to as Indentors, with a view to pr'lmote its sales. In the
     fixation of the normal price of these items under section 4 of the Act for
0    the purpose of levy of excise duty, the appellant claimed deduction on
     account of 'service charge discount' paid to the Indentors, in addition to
     the 'trade discount' paid to the purchasers.

          Having failed before the assessing authority and the Central             /.I.
     Excise and Gold (Control) Appellate Tribunal in respect of the deduc-
E    tion claimed on account of •service charge discount' the appellant
     appealed to this court.

           It was contended on behalf of the appellant that although in some
     of the sales the discount allowed to the lndentors might have been
     described as 'service charges discount', that name could not govern the
J1   real nature of the transaction and the discount was really a 'trade            )
     discount'. It was further contended that in several cases the indentors
     were really the purchasers themselves and hence, the normal trade
     discount paid to them should hav been allowed as a deduction.

           Dismissing the appeal, this Court,
G
           HELD: (1) The trade discount was discount paid to the pur-
     chaser in accordance with the normal practice of the trade. In the
     determination of the normal price for the purposes of levy of excise
     duty, it is only a normal trade discount which is paid to the purchaser
     which can be allowed as a deduction and commission paid to selling
H    agents for services rendered by them as agents cannot be regarded as a

                                        320
              PAPER & BOARD LTD. v. CENTRAL EXCISE (KANIA,J.)            321

    trade discount qualifying for deduction. [3i3B-C]
                                                                               A
          Union of India & Ors. v, Bombay Tyres lnternatidndl Pvt, Ltd.,
    [1984) 17 E,L,T, 329 (S.C.) and Coromandel Fertiliiefs Li!tiil~d v,
    Union of India & Ors., [1984] 17 E.L.T. 607 (S.C,); referred to,

          (2) If in any case the purchaser named hi the invoice is the         B
    same as the lndentor, normal trade discount given io the Irtdenior
    will be allowed as a deduction in the determinati<iii of the normal
    price for the levy of the excise dnty subject to other relevant consi-
    derations. [324B-C]

          CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3217 C
    of 1988.

         From the Judgment and Order dated 30.5.88 of the Customs
    Excise and Gold (Control) Appellate Tribunal, New Delhi in E/Misc/
    194/87-A & BIA No. 1365/85-A & Order No. 308/88-A.
                                                                               D
         Gauri Shankar, Mrs. H. Wahi, Manoj Arora and S. Rajjappa for
    the Appellant.

         Soli J. Sorabjee, Attorney General, V.C. Mahajan, R.P,
    Srivastava and P. Parmeshwaran for the Respondent.
                                                                               E
          The Judgment of the Court was delivered by

          KANIA, J, This is an appeal preferred by the appellant (asses-
    see) from a judgment of the Central Excise and Gold (Control) Appel-
    late tribunal, New Delhi (hereinafter referred to as "the said
    Tribunal").                                                                F

         As the controversy before us is an exiremely limited one; we
    propose to set out only the facts necessary fot appteciaiihg that
    controversy,

          The appellant is a public limited company engaged iliier a/ia in (]
    the manufacture of paper and paper boards which were assessable
    under Tariff Item No. 17 of the First Scheduie to the Central Excises
/   and Salt Act, 1944 (hereinafter referred to as "the Central Excises
'
    Act"). The period with which we are concerned in this appeal is the
    period September 9, 1979 to Juty 26, 1983. The appeltant filed several
    price lists in Part I and Part II iii respect of the deatances bf pttpet and H
    322                     SUPREME COURT REPORTS               [1990) 1 S.C.R.

    paper boards made by the appellant. Section 4 of the Central Excises
A
    Act prescribes the mode of valuation of excisable goods for the
    purposes of charging of the duty of excise. Under clause (a) of sub-
    section ( 1) of section 4, it is provided, in brief, that the duty of excise is
    chargeable on any excisable goods with reference to value which shall,
    subject to the other provisions of the Act, be deemed to be the normal
                                                                                      _j
B   price therof and the normal price, generally speaking, is the price at
    which such goods are ordinarily sold by the assessee to a buyer in the
    course of wholesale trade for delivery at the time and place or
    removal, where the buyer is not a related person and the price is the
    sole consideration for the sale. In the fixation of the normal price of
    paper and paper boards manufactured by the appellant for the
    purposes of levy of excise duty, the appellant claimed several deduc-
c   tions. One of these deductions was described as "trade discount" and
    another as "service charge discount". The trade discount was the dis-
    count paid to the purchaser in accordance with the ·normal practice of
    the trade. The appellant had engaged several dealers with a view to
    promote its sales. A specimen of the usual agreements entered into by
D   the appellant with its dealers has been taken on record. The opening
    part of the said agreement shows that the appellant is referred to in the
    agreement as the company and the contracting dealer is referred to as
    the lndentor. We propose to refer to the dealers engaged by the appel-
    lant to promote the sales of its pruducts as "Indentors" _for the sake of
    convenience. Clause (3) of the agreement shows that the Indentor
E   agreed to purchase in his own name or procure acceptable indents
    from third parties for paper and paper boards manufactured by the
    company would be of such quantities and varieties as set out in the
    Schedule A to the agreement. ·The lndentors agreed to deQosit with the
    company a certain amount of money as security. Clause (8) of the
    agreement shows that the Indentors held themselves responsible for
F   the immediate clearance of the documents relating to the supply of
    paper on presentation by the bankers and that all bank charges other
    than discounting charges would be on the consignee's account.

          It is common ground that in the invoices in respect of the paper
    and paper boards supplied and sold pursuant to the aforesaid agree-
G   ment with the lndentors, in most cases the name of the dealer con-
    cerned was shown as the Indentor and the names of the parties to
    whom the goods were to be delivered were shown as the purchasers
    but in some cases the Indentors were themselves shown as purchasers.
    It was urged by Dr. Gauri Shankar, learned counsel for the appellant,
    that although the discount allowed to the Indentors in resp~ct of some
H   of the aforesaid sales might have been described as service charge
            PAPER & BOARD LfD. v. CENTRAL EXCISE (KANIA, J.]        323

  discount that name could not govern the real nature of the transaction A
  and the discount was really a trade discount. It was submitted by him
  that this discount should have been alhwed as a deduction in the
  determination of the normal price of the aforesaid goods for the
  purpose. of levy of excise duty. He relied upon the decision of this
  Court in Union of India & Ors. v. Bombay Tyres International Pvt.
  Ltd., [1984] 17 E.L.T. 329 (S.C) and submitted that the nomenclature B
  given to the discount could not be regarded as decisive of the real
  nature of the discount. There can.be no quarrel with this proposition. But
  it is equally well settled that in the determination of the normal price
  for the purposes of levy of excise duty, it is only a normal trade dis-
-count which is paid to the purchaser which can be allowed as a deduc-
  tion and commis.sion paid to selling agents for services rendered by C
  them as agents cannot be regarded as a trade discount qualifying for
  deduction ( Coromandel Fertilizers Limited v. Union of India and Ors.,
  [1984] 17 E.L.T. 607 (S.C.). The correctness of this proposition was
  not disputed by learned counsel for the appellant but it was submitted
  by him that in several cases where supplies had been effected pursuant
  to the aforesaid agreements, the Indentors,were really themselves the D
  purchasers and hence, the normal trade discount paid to them should
  have been allowed as a deduction in the determination of the normal
  price for the purposes of levy of excise duty. We find from the judg-
  ment of the Tribunal and the lower authorities that there is no dispute
  that wherever the Indentors are shown as the purchasers in the respec-
  tive invoices, the trade discount given to them has been allowed as a· E
  deduction. Moreover, to obviate any controversy In this regard,
  learned Attorney General who. appears for the respondent fairly states
   that when the matter goes back to the Tribunal, the respondent is
   agreeable that the normal trade discount may be allowed in those cases
  where the Indentor is also shown as the purchaser in the concerned
   invoice. It is, however, submitted by learned counsel for the appellant F
   that although in some of the cases the Indentor might not be shown as
   the purchaser and the purchaser shown is the different. party, yet the
   real nature of the transaction was that the lndentor purcfiased the
   goods referred to in the sai.d invoice and. in turn sold it to a customer
   whose name was shown as the purchaser in the invoice for the sake of
   convenience so that the delivery could be directly effected to him. We G
   are of the vfew that it is not open to the appellant to raise this conten-
   tion at t.his stage. No case has ever been made out right upto the
   Tribunal and even before the Tribunal ·that in respect of any particular
   invoice although the name of the purchaser was other than tfiat of the
   lndentor, it was really the lndentor who was the purchaser and he in
   turn has sold the goods to the third party whose name was shown as H
A
     324                    SUPREME COURT REPORT~             [1990) 1 S.C.R.

     purchaser or even that the Indentor had entered into the transaction as
                                                                                  ,
     the agent of the purchaser. If such a contehtion had been raised, the
     factual position could have been examined and different considera-
     tions inighi have been applied. But it is certainly not open to the
     appellant to raise this contention at this stage, in this appeal, particu-
     larly keepihg in mind that the Tribunal is the final fact-finding autho-
     rity. No other contention has been raised before us.

            In ciut opinion, there is no merit in the appeal. there will, how-
     ever, be one clarification that, as agreed to learned Attorney General,
     if in any case the purchaser named in the invoice is the same as the
     lndetltor; nofinal trade discount given to the Indentor will be allowed-
c    l!S a deduciion ill the deterrnination of the normal price for the levy of
     excise duty subject to other relevant considerations,

          In the result, the appeal fails and is dismissed, save to the exteht
     of the aforesaid clarification. The appellant to pay the costs of the
     appeal to the respondent.
iJ
     R.S.S.                                                 Appeal dismissed.