COROMANDEL FERTILIZERS LIMITED versus UNION OF INDIA AND ORS.

Citation: [1985] 1 S.C.R. 523 · Decided: 17-08-1984 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Dismissed

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

Judgment (excerpt)

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523 
COROMANDEL FERTILIZERS LIMITED 
v. 
UNION OF INDIA AND ORS . 
17th August, 1984 
(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, 
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 
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 
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 
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 
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. 
A 
B 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
E 
F 
G 
524 
SUPREME COURT REPORTS 
[1985] I s.c.R. 
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. 
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 
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 
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 
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 

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