ASSISTANT COLLECTOR OF CENTRAL EXCISE & OTHERS ETC. versus MADRAS RUBBER FACTORY LTD.

Citation: [1987] 1 S.C.R. 846 · Decided: 20-12-1986 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Disposed off

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
13 
ASSISTANT COLLECTOR OF 
CENTRAL EXCISE & OTIIERS ETC. 
v. 
MADRAS RUBBER FACTORY LTD. 
DECEMBER 20, 1986 
[P.N. BHAGWATI, CJ AND V. KHALID, J.] 
Central Excise and Salt Act, 1944: Section 4; Central Excise Rules, 
1944: Rule 96; Central Excise (Valuation) Rules, 1975: Ru/e4. 
Excise duty-Valuation of.excisable goods-'Assessable Value'-
~ 
C Determination of-TAC/Warranty, product discount, overriding com-
mission, duty paid on processed tyre cord, secondary packaging cost, 
interest on goods after removal from factory gate till date of sale, interest 
-f'
on receivables, cost of distribution at duty paid sales depots-Deduction 
of-Whether permissible and valid. 
D 
E 
Lower price for Government Departments-Wh~t~er normal 
price. 
Computation of assessable value in a cum-duty price at factory 
gate-Permissible deductions should first be deducted. 
In Union of India v. Bombay Tyres International Ltd., [1984] I 
SCR 347, this Court held that under s.4 of the Central Excise and Sah 
Act, 1944, only those expenses which, were incurred on account of 
factors contribnting to the product's value upto the date of sale or the 
date of delivery at the factory gate were liable to be included in the 
F assessable value. On November 14/15, 1983 the Court made a clarificat-
ory order wherein it was stated that discounts allowe«! :u the trade (by 
whatever name called) should be allowed to be deducted from the sale 
price having regard to the nature of the goods, if established under 
agreements or under terms of sale or by established practice, and that 
such allowance and the nature of discount should be known at or prior 
G to the removal of the goods and should not be disallowed only becallSe 
they were not payable at the time of each invoice or deducted from the 
invoice price. 
The respondent-Rubber Factory claimed various deductions of 
the nature of post-manufacturing expenses for determining the assess-
H able value of their products under s.4 of the Act which were disallowed 
846 
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A.C.C.E. v. MADRAS RUBBER FACTORY 
847 
by the Excise authorities. Its writ petitions were, however, allowed by 
the High Court. 
A 
In appeals by the Union of India for setting aside the High Court 
judgment it was contended for the respondent: (a) that the TAC/ 
Warranty discount, which was sought to be deducted for determining 
the assessable value, ·satisfied all the criteria of a trade discount 
stipulated in the clarificatory order; (b) that the claim for deduction of 
product discounts-prompt payment discount, year-ending discount 
and campaign discount-was justified on the same reasoning; (c) that 
the interest on finished goods from the date the stocks were cleared till 
the date of sale was a proper deduction for determination of the assess· 
able value; ( d) that the claim for deduction or interest on rec:eivables 
(sundry debtors for sales) was justified on the ground that this cost was 
inbuilt in the price and was incurred on account of the time factor 
between the delivery ·of goods lmd realisation or moneys; (e) that the 
overriding commission allowed to the Hindustan Petroleum Corpora• 
lion for exclusive sale of company's products through their dealer net 
work was also of the natore of a discount; (f) that the cost of distribution 
at the duty paid sales depot was a proper deduction; (g) that the differ· 
ence between the lower price at which the product was sold to the 
Government and the price charged from brdinary dealer was of the 
natore of a discount; (h) that the claim for deduction of special secon-
dary packaging charges squarely falls within s.4(4)(d)(i) of the Act, and 
(i) that the company was entitled to the deduction of excise duty paid on 
processed tyre cord under s.4(4)(d)(ii). 
The respondents also disputed the method of computation of 
'assessable value' in a cum-dtity price at a factory gate sale and con-
tended that such value was to be arrived at by first deducting the 
predetermined excise duty added to the factory price and only there· 
after the permissible deductions were to be deducted. 
Disposing of the appeals, the Court, 
B 
c 
D 
E 
F 
HELD: I.I The respondent company is not eE1titled to the deduc• 
lion of TAC/Warranty discount for determining assessable ~aloe of G 
tyres since it does not come within s.4(4)(d)(ii) of the Central Excise and 
Salt Act, 1944. [8568, 857A, 8558] 
1.2 Even though giving of TAC/Warranty is established by 
practice for the wholesale trade or c

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