Full Judgment
2. Shri A.L. Malhotra, learned Consultant, submitted that M/s. Havell's Electronics Pvt. Ltd., manufacture electrical change over switch, electrical fuse unit, electrical board and pannel and parts thereof which are marketed through the dealers; that the Deputy Commissioner, under the Order-in-Original Nos. 41-49/2001 dated 28.9.2001, disallowed the deduction on account of cash discount and turnover discount on the ground that these discounts were paid at the end of the financial year and as such were not known before hand and were not uniformly given to each concern; that on appeal, the Commissioner (Appeals), under the impugned order, had allowed the deduction on account of cash discount holding that the scheme of cash discount offered by the assessee was within the scope of permissible discount as laid down in various judgments; that the Commissioner (Appeals), however, disallowed them the turnover discount holding that the same was not a normal discount as it was not based on any recognisable commercial scheme. The learned Consultant submitted that the discount given by them was known to their customers prior to removal of the goods, which is evident from the invoices issued by them; that the discount was payable, however, subsequently, being in the nature of cash discount and turnover discount; that they had shown deduction on account of cash discount and turnover discount in the appropriate column specified by the Board.
3. On the other hand, Sh. S.M. Tata, learned S.D.R., submitted that the Commissioner (Appeals) has rightly disallowed the deduction on account of turnover discount as the grant of the said discount was not subject to any condition promoting the marketability of the goods; that the cash discount is not deductable from the assessable value as the assessee has failed to submit the evidence to enable the Department to allow the discount; that they had submitted only some invoices, some orders of acceptance and some payment advices and some credit without establishing any co-relation; that there was no confirmed and established policy of the assessee in giving the cash discount which goes to show that the buyers were not aware of the scheme of cash discount.
4. We have considered the submissions of both the sides. It has been held by the Supreme Court in the famous case of Union of India v.Bombay International Tyre Ltd. 1984 (17) ELT 329 (SC) that discounts allowed in the trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, the allowance and nature of the discount being known at or prior to the removal of the goods. Such trade discount shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price.
The Commissioner (Appeals), has given a specific finding that the assesse allowed 4% deduction to customers if the payment is received, with 30 days, to same other persons, who are given a time of 45 days and there are instances where the period is allowed upon 60 days. It has also been mentioned by the Commissioner (Appeals), in the impugned order, that "in all cases the quntum of cash discount is made known to the buyer prior to the sale." Nothing has been brought on record by the Revenue to rebut this specific finding of the Commissioner (Appeals).
There is no force in the grounds of appeal filed by the Revenue that merely because in some cases the period allowed for payment was upto 60 days also, the buyers were not aware of the scheme of cash discount on the purchase of the goods. Accordingly, we hold that the Commissioner (Appeals), has rightly allowed the deduction of cash discount from the assessable value. Accordingly, the appeal, filed by the Revenue is rejected.
5. Regarding turnover discount, it has been mentioned in the impugned order that the turnover discount is given by the assessee across the board and the said discount does not depend upon the turnover purchase effected by the buyers claiming the discount. It has been mentioned in the impugned order that "in fact, 4 per cent discount is given to all buyers irrespective of any consideration. All buyers are given credit notes after a lapse of certain period." The reason for disallowing the deduction of the said discount in the impugned order is that the discount of this nature is not a trade discount as it is understood in commercial parlance. There is nothing on record to suggest that this discount was not known to the customers prior to the removal of the goods. The mere fact that the discount was not allowed at the time of each invoice will not make it an inadmissible discount. It has been held by the Supreme Court in Bombay International Tyre (supra) that such trade discount shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price.
We, therefore, hold that the appellants are eligible for deduction of turnover discount given by them to their customers. Accordingly, the appeal filed by M/s Havell's Electronics Pvt. Ltd., is allowed.