LexSESHASAYEE PAPER & BOARDS LIMITED, ERODE versus COLLECTOR OF CENTRAL EXCISE, COIMBATORE
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SESHASAYEE PAPER & BOARDS LIMITED, ERODE
v.
COLLECTOR OF CENTRAL EXCISE, COIMBATORE
FEBRUARY 13, 1990
[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.
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
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
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Excise and Gold (Control) Appellate Tribunal in respect of the deduc-
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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
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real nature of the transaction and the discount was really a 'trade
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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,
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
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agents for services rendered by them as agents cannot be regarded as a
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PAPER & BOARD LTD. v. CENTRAL EXCISE (KANIA,J.)
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trade discount qualifying for deduction. [3i3B-C]
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,
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(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.
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.
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
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Tribunal").
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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
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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
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SUPREME COURT REPORTS
[1990) 1 S.C.R.
paper boards made by the appellant. Section 4 of the Central Excises
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,
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