ESCORTS LIMITED AND ANR. versus COLLECTOR OF CENTRAL EXCISE, CHANDIGARH

Citation: [2003] 2 S.C.R. 1052 · Decided: 12-03-2003 · Supreme Court of India · Bench: S.S.M. QUADRI · Disposal: Dismissed

Judgment (excerpt)

A 
ESCORTS LIMITED AND ANR. 
' -
v. 
COLLECTOR OF CENTRAL EXCISE, CHANDIGARH 
MARCH 12, 2003 
B 
[SYED SHAH MOHAMMED QUADRI AND ASHOK BHAN, JJ.] 
Central Excise Act, 1944: 
c 
S.4(J}(d)(ii)-Excise duty-Valuation of excisable goods-Differential 
discount between stockists discount and sub-stockists discount passed on to 
stockists-Deductability of in assessing excise value of goods sold to sub-
stockists-Assessee, manufacturer of parts and accessories of tractors-Selling 
60% of its product to stockists at 27.5% discount and 40% direct lo sub-
stockists at 25% discount-Passing the differential of 2.5% on to stockists-
D Notice issued to assessee lo disallow differential discount-Held, differential 
discount of 2. 5% passed on to area stockists by assessee was rightly disregarded 
as it is not and cannot be treated as a discount given to sub-stockists-It 
cannot also be treated as discount given lo area stockists though it was passed 
on to them because it does not relate to tractors sold to them-It is not a case 
E 
of sale of all tractors to stockists and dispatch of 40% of tractors lo sub-
stockists at the instance of stockists-For all purposes, sale of tractors to sub-
stockists is separnte and independent of sale to stockists-As regards the plea 
that differential was passed on to stockists as commission, even otherwise, the 
differential discount cannot be accepted for the purpose of sub-clause(ii) as 
a permissible deduction. 
F 
Seshasayee Paper and Boards Limited v. Collector of Central Excise; 
47 E.L.T. 202 relied on. 
I 
CIVIL APPEL LA TE JURISDICTION : Civil Appeal Nos. 12009-12042 
', 
of 1995. 
G 
From the Judgment and Order dated 30.8.1993 of the Central Excise 
Customs and Gold (Control) Appellate Tribunal, New Delhi in A. No. El 
2629/83-A and 33 Others in F.0. Nos. 421-454 of 1993-A. 
A.R. Madhav Rao. Ms. Bina Gupta, Alok Yadav, Ms. Vanita Bhargava 
H and R.K. Sharma for the Appellants. 
1052 
ESCORTS LTD. v. C.C.E 
1053 
Anoop G. Chaudhary, Dileep Tandon, Ms. June Chaudhary and B. A 
Krishna Prasad for the Respondent. 
The following Order of the Court was delivered : 
SYED SHAH MOHAMMED QUADRI. J. These appeals, by the 
assessees [M/s. Escorts Limited and Mis. Goetze (India) Limited], are from B 
the order of the Customs, Excise and Gold (Control) Appellate Tribunal, 
New Delhi in Appeal Nos. 421-454 of 1993 dated August 30, 1993. 
The short point that arises for consideration is: whether the differential 
discount between stockists discount and sub-stockists discount passed on to 
the stockists by the assessee, is deductible in assessing th·e excisable value of C 
the goods sold to the sub stockist? 
The assessees manufacture parts and accessories of motor vehicles, 
tractors, trailers and other stationary/diesel engines. The goods in question 
are tractors. During the relevant period, out of the tractors manufactured by 
the assessees, sixty per cent were sold to their stockists at 27 .5 per cent D 
discount and forty per cent were sold to their sub-stockists at twenty five per-
cent discount. The differential discount of 2.5 per cent, was passed on to the 
stockists by the assessees. It is the deductibility of that amount, in arriving 
at the excisable value of the tractors sold to the sub-stockists, that is in 
question in these appeals. The Assistant Collector, Central Excise, initiated 
the proceedings by issuing a show-cause notice as to why the differential 
discount should not be"disallowed. He eventually disallowed deduction of the 
differential discount. On appeal, by the assessees, the Collector (Appeals ) in 
some cases took the view that the differential discount was an allowable 
E 
deduction but in other appeals, he came to a different conclusion. Against 
those order, both the assessees as well as the Revenue filed appeals before p 
the Customs, Excise and Gold (Control) Appellate Tribunal [for short, 'the 
Tribunal']. By the orders impugned in these appeals, the Tribunal upheld the 
orders of the Collector (Appeals ) declining to permit deduction of the 
differential discount and set aside the orders of the Collector (Appeals) 
permitting the deduction of the differential discount. Thus, the assessees are 
in appeal before this Court. 
G 
For levying excise duty, the valuation of goods is made in accordance 
with the principle contained in Section 4 of the Central Excise Act, 1944, 
which insofar as it is relevant for our purposes, reads as follows: 
"Section 4 - Valuation of excis

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