1. This is an appeal filed against the order of the Collector of Central Excise, Calcutta who has confirmed the demand raised against the appellants for short levy of duty and has also levied personal penalty on the appellants. The appellants filed a price list in respect of exhaust fans and air circulators and claimed an abatement of discount of 27.8% and 20% from the wholesale trade price. The appellants were, however, found to have not allowed this discount uniformly to all the buyers and ranged between 15% and that mentioned in the price list. The Collector allowed an abatement of 15%, the minimum discounts which had been given to all the buyers uniformly. The demand raised was for the period April 1980 to March 1982. The appellants were charged with misdeclaration in respect of the abatement of discount claimed in the price list and duty demand was made under Rule 9(2) under Section 11A of the Act and the provisions of Rule 173Q were also invoked. The appellants as is seen from the facts on record, were selling part of their goods to the wholesale dealers and were allowing discount as mentioned in the price list. However, they were also making despatches to some other sub-dealers and consumers purported to be on the advice of the wholesale dealers and in the case of such sales, they are stated to have allowed less discount than indicated in the price list filed with the Department and difference between the discount given and that mentioned in the price list was passed on to the wholesale dealers. Discount allowed to the sub-dealers or consumers as the case may be, varied from case to case. However, the appellants have stated that no part of their discount out of the quantum mentioned in the price list was retained by them. In short, their plea is that the full discount as mentioned in the price list was split between the sub-dealers etc., and their wholesale dealers based on the instructions of the wholesale dealers. The transactions, it has been claimed, were on principal to principal basis. The appellants have denied that there has been any misdeclaration on their part or any contravention of Rule 9(1) warranting the application of penal provision of Rule 173Q. They also pleaded provision of Section 11A as applied, was not applicable in their case. The appellants also pleaded before the Collector that 60% of their transactions in the case of one item and 70% in the case of other item were directly to the wholesale dealers and the discount given was as per their declaration in the price list. In the remaining cases also, according to them the full discount as declared in the price list, had been passed on viz. part of the discount being allowed to the sub-dealers and then after realisation of the amount from them the balance amount of discount was passed on to the wholesale dealers. Their plea is that they had paid duty based on the net realisation by them which was the wholesale price less the trade discount as declared by them.
2. The learned advocate for the appellants, Shri N. Mookerjee, pleaded that it is not a requirement of Section 4 of Central Excises & Salt Act, 1944 that for the discount to be abated for the purposes of this section, these should be allowed uniformly. What is required is that the discount should be available in respect of the transactions or sales and known to be so at the time of sale irrespective of the fact whether discount is mentioned in the invoice or is passed on later. He cited the case of Union of India and Ors. v. SSM Brothers Private Limited : 1985 (22) ELT 766; Gujarat State Fertilisers Company Limited v. Union of India and Ors., 1980 ELT 397 (Guj.) and 1978 ELT (J 444); Atic Industries Limited v. H.H. Dave, Assistant Collector of Central Excise and Ors. and 1983 ELT (J 239) in case of J.K. Cotton Spinning& Weaving Mills and Ors. v. Union of India and Ors. He pleaded that net realisation made by the appellants was the wholesale price less the discount as shown in the price list and approved by the departmental officer. He pleaded that even if part of the discount allowed was given to the wholesale dealers by way of commission, even then the same was admissible for abatement from the wholesale price and he cited the case of Moped Private Limited v. Union of India: 1986 (23) ELT 8 (SC). He further pleaded that there is no case for levy of penalty and there is no finding that the appellants wifully evaded the payment of duty and referred the case reported vide 1978 ELT (J 159) (S.C.) in the case of Hindustan Steel Limited v. State of Orissa. Shri Mookerjee, however, pleaded that the prices to the sub-dealers and consumers where lower discount was allowed was at the behest of the wholesale dealers appointed by the appellants. But he could not show any evidence that the despatches had been made to sub-dealers etc. at the behest of wholesale dealers. He, however, stated that the Collector has not given any adverse finding in regard to this plea. His plea is that all the transactions were either with the wholesale dealers or through them and direct despatches to the sub-dealers etc. were for convenience of transport and for saving sales tax.
3. Shri B.R. Tripathi, SDR, pleaded that actuality of all the transactions should be taken into account. According to him, there were transactions in which the lower discount was allowed and the realisation by the appellants was more than what was declared to the Department in the price list. He stated that it is borne by the fact that the sales tax has been paid by the appellants on the net realisation which was more than the assessable value arrived at based on the declaration in the price list. The appellants, according to him, had not disclosed to the Department the lower discounts allowed in the transactions and the portion of the differential discount passed on to the wholesale dealers was in the nature of commission which was not abatable for the purposes of Section 4. He cited the case of Shyam Glass Works v. Inspector of Central Excise, Sasni and Ors.: 1979 ELT (J 460) and 1983 ELT (14) 1787 in the case of Zoraster & Company (Supplies) Private Limited, Jaipur v. CCE, Jaipur and also order of the CEGAT No. 152/84-A in the case of Standard Autoparts Pvt. Ltd, Jodhpur v. CCE, New Delhi whereby a minimum discount given uniformly was allowed for abatement.
4. The learned advocate for the appellants also pleaded that the demand was hit by time bar and only limit of six months period was available for raising the demand. The demand, according to him, was raised for period of October 1974 to September 1975 and a show cause notice was issued on 13-7-1982. He pleaded that there was no finding from the Collector that the appellants had intentionally held back the fact of grant of lower discount with the intention to evade payment of duty.
His plea is that the appellants are making net realisation as per declaration in the price list and they were genuinely under the impression that under the law the duty was payable based on the net realisation.
5. Shri Tripathi, SDR, stated in this regard that the fact of lower discount was not revealed to the departmental officers. But he could not show that there was any finding about the wilful suppression of facts. He pleaded that the levy should be on the basis of culpability and left the matter in this regard to the judgment of the Tribunal.
6. From reading of the Order of the Collector, it appears as if the discount, as mentioned in the price list, had not been allowed by the appellants at all in respect of any transaction. We find from the annexures attached to the Order-in-Original in the Paper Book that in case of large number of transactions in respect of exhaust fans and air circulators discounts of 27.8% and 20% respectively as declared in the price list, have been given. The transactions where lower discounts have been given have also been listed. The Collector, we find, has not disputed the appellants' submission that they had passed on the difference of the discount to the wholesale dealers in respect of sales directly made to sub-dealers etc. In fact, he has observed: "The overriding commission viz. difference between the two rates of discount given to the so-called wholesale dealer is in the nature of sales expenditure and there are not actual sales to such wholesale dealers but the sales are to other dealers who sell the impugned goods otherwise than in retail." This confirms that the difference has been passed on to the wholesale dealers. The appellants have pleaded before us that 60% of the sales in the case of one item and over 70% in the case of other item were made to the wholesalers and the discount passed onto the wholesale dealers was as declared in the price list. There is no contradiction from the learned SDR in this regard.
"Exhaust fans and air circulators respectively. It is important to note that no other provisions and/or any remarks were either mentioned in the price list or any correspondence was ever made by the said Company with the Department regarding their allowing of lesser discount @ 15% on their products to some of their dealers/buyers during the relevant period. Accordingly, on the basis of their declaration the said price lists were approved by the proper Central Excise Officer. In absence of any declaration or subsequent modification of the declared rate of discount, the approval order on the price list in its entirety inclusive of discount is not binding and any deviation thereto is not binding and any deviation thereto is permissible in view of the actual discount shown in the bills.
In the present case, the maximum discount allowed by the said Company during the relevant period was @ 15% on their products instead of the declared rate of discount @ 27.8% and 20% on exhaust fans and air circulators respectively as is evident from the bill and challans of the said Company and as a result of which the said Company realised higher prices from their dealers/customers than the declared prices and consequently the assessable value was shown less at the time and removal of the said goods during the aforesaid period.
In practice the said Company are found to have allowed only @ 15% discount to such transactions and it is obvious that their declaration in the price list has got no practical bearing. It is observed that declared rate of discount was not outrightly allowed at the time of sale of the said goods during the material period, instead, the same goods was allowed at a much lower rate with a consequential benefit availed of by the said company. Since the said goods were actually sold at the factory gate at wholesale rate allowing 15% trade discount it is that rate which must be taken as the price for levy of excise duty. There existed a wholesale market of the said Company at the factory gate during the mateial period, even though the sales of factory gate were not many, the said Company cannot ignore, the rates at which whose sales where effected. The overriding commission viz. difference between the two rates of discount given to the so-called wholesale dealer is in the nature of sales expenditure and there are not actual sales to such wholesale dealers but the sales are to other dealers who sell the impugned goods otherwise than in retail".
(i) the appellants were selling part of the goods to the so-called wholesale dealers allowing the discount as mentioned in the price list; (ii) part of the goods were being sold to sub-dealers and consumers and lower discount than that declared in the price list was allowed and in no case lower than 15%; (iii) the differential discount, that is, the difference between lower discount to the sub-dealers and consumers and that in the price list was passed on to the wholesale dealers; (iv) the net realisation by the appellants is as per the price declared in the price list.
9. Question that arises for our consideration is as to whether the discount as declared in price list should be allowed in respect of all the sales or the lower discount 15% which was uniformly given to all buyers should be allowed. The appellants case is that direct despatches to sub-dealers and consumers etc., was at the behest of the wholesale dealers appointed by them and for the convenience of transport and also for getting the benefit of paying lower rate of sales tax. The Collector has held that the differential discount passed on to the wholesale dealers is in the nature of commission given to them for trade promotion and is therefore not eligible for abatement in terms of Section 4 of the Central Excises & Salt Tax.
10. We find that the appellants have made sales to the wholesale dealers allowing the discount as set out in the price list filed by them. These sales are stated to be 60% in the case of one item and 70% in the case of other. The quantum of the sales made and the discount allowed has not been disputed by the Revenue. Regarding the remaining sales, while the appellants have pleaded that these sales were made at behest of the wholesale dealers for the sake of convenience of transport etc., but no evidence has been given that these sales had been effected at the behest of the wholesale dealers. However, we find that the appellants have passed on the difference between the discounts, that is, the discount as allowed for the purpose of these direct sales and that mentioned in the price list to the wholesalers.
There is no contradiction in this regard by the Revenue. In fact, there is confirmation of this fact by Collector's order who has held that this difference of discount passed on to the wholesale dealers was in the nature of sales promotion expenses. The fact that this differential discount was passed on to the wholesale dealers goes to show that the wholesale dealers must be having something to do with execution of these sales as otherwise there is no compulsion that the appellants would pass on this differential discount which they could have easily appropriated to themselves. We have to hold it so as no evidence has been adduced by the Department that there was any sales promotion done by the wholesale dealers and that the amounts passed on to them were attributable to such expenses. The Collector's findings regarding the commission given for sales promotion expenses, cannot be accepted in the absence of any evidence or basis laid in this regard in his Order.
No investigation appears to have been done in this regard. Nor any statement has been recorded from the wholesale dealers or sub-dealers or consumers in this regard. It is seen that the total discount in respect of sales made by the appellants was known at the time of sales although a part of the discount had been passed on to the wholesale dealers afterwards. It has not been shown that the wholesale dealers were acting as commission agents. It is not unknown in the trade that in some cases the wholesale dealers direct certain sales to be made directly to ultimate consumers and to sub-dealers for commercial reasons. No case has been made out before us that the wholesale dealers appointed were functioning as commission agents. There is also no contradiction from the Revenue that net realisation by the appellants in all the cases were as per the price list filed and approved. In this context, therefore, the peculiar facts and circumstances of the case we hold that in respect of all transactions the appellants have passed on the full discount as shown in the approved price list. We hold that the appellants were eligible for full discount as approved by the departmental authorities in respect of whole range of transactions. The Collector's order is, therefore, set aside and the appeal is allowed.
Regarding the question of time bar no findings have been given in view of our decision above.