MOPED INDIA LTD. versus THE ASSTT. COLLECTOR OF CENTRAL EXCISE, NELLORE AND OTHERS

Citation: [1985] SUPP. 1 S.C.R. 954 · Decided: 26-02-1985 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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954 
MOPED INDIA LTD. 
v. 
THE ASSTT. COLLECTOR OF CENTRAL EXCISE, 
NELLORE AND OTHERS 
February 26, 1985 
[P.N. BHAGWATI AllD V. BALAKRISHNA ERADI, JJ.] 
Central Excise and Salt Act 1944: Section 4(4) (c)-'related person'-Wh,, 
is-Assessee and person alleged to be •relaJed person' to have inetrest direct or 
indirect in business of each other. 
Manufacturer of Mopeds-Mopeds sold to dealers-Agreements for sa'e 
enttreJ by manufact11rer with dealer-Dealers to give depoisl for guarantee, 
entitleme'nt to 'commission' etc.-Transactions on principal to principal basis-
Dealers- Whether 'related person'-'Commission' allowed to dealers-Whether 
'trade discount' whether 'commission' could be deducted from assessable value of 
manufactured goods for purpose of excise duty. 
The appellants manufactured Mopeds under three different brand names. 
Mopeds were liable to excise duty under the Central Excise and Salt Act, 1944. 
The bulk of the Mopeds manufactured were delivered to various dealers at 
depots maintained by the appellants. The appellants entered into agreements 
with these dealers in connection with the sale of the Mopeds. The agreements 
provided that the dealer shall keep a deposit with the appellants as a guarantee 
for due fulfilment of the agreement, that the dealers were entitled to get a 
commission on each Moped, that the dealers were to insure the Mopeds against 
all risks of pilferage, non-delivery etc. (Clause 5), and that, the dealers were to 
maintain adequate organisation for sale and service of the Mopeds including 
show-rooms, service stations, repair-shops etc. (clause 6J. 
The appellants submitted their price lists for approval to the excise 
authorities and the price lists showed the price lcharged by the dealers after 
deducting the commission of Rs. 110, Rs. 145 and Rs. 16S or the three different 
brands of the Mopeds. The prtce lists were approved by the excise authorities 
and excise duty was paid by the appellants on the basis of these price lists at 
the time of clearance of the Mopeds. This practice continued till 30th April, 
1979, when the Assistant Collector of Central Excise took the view that the 
appellants were not entitled to deduction of tho aforesaid commission from the 
price charged to the dealers for arriving at tho excisable value of tht Mopeds. 
Tho Assistant Collector thereupon issued. a notice of demand under clauses (a) 
and (b) ofRule 10(1) of tho Central Excise Rules, 1944 dated 15th May, 1979 
to the appellants demanding a sum of Rs. 6,96,177.09 representing the amount 
of differential duty In respect of Mopeds manufactured and cleared during the 
period Isl October 1975 to 30th April, 1979. 
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MOPBD INDiA LTD. V. AsSTT COLLECTOR i!ltclSB 
;55 
The appellants assailed the aforesaid notice In a writ petition in the 
High Court contending, that they were entitled to deduction or the amount of 
commission in arriving at the excisable value of the Mopeds and that the 
demands made by the Assistant Collector was not justified. The Division 
Bench however dismissed the writ petition and held that the discount of 
Rs. 110, Rs. 145 and Rs. 165 for the different varieties of Mopeds was being 
given for organising sale and providing facilities and tbis was clearly an 
example of the mutual interest which the 'related person:s and the appellants 
were having in the business of each other, and that the commission of Rs. 110, 
Rs. 145 and Rs. 165 in respect of the different varieties of Mopeds was 
not 'trade discount' and therefore not liable to be deducted from the price 
charged to the dealers and the Assistant Collector was riaht in making the 
demand from the appellants. 
In the appeal to this court it was contended on behalf of the appellants 
that : (l) there was absolutely nothing to show that the dealers were related 
persons vis-a-vis the appellants and that the High Court was clearly wrong in 
taking that view, and (2) the Division Bench was not right in taking the view 
that the commission of Rs. 110, Rs. 145 and Rs. 165 per Moped in respect of 
the different varieties of Mopeds sold to the dealers could not be said to be 
trade discount. 
Allowing the appeal, 
HELD ~ l. The amounts allowed to the dealers by the appellants in 
respect of different varieties of Mopeds of Rs. 110, Rs. 145 and Rs. 165 were 
clearly trade discount liable to be deducted from the price charge to the dealers 
for the purpose of arriving at the excisable value of the Mope
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