1. The dispute relates to the deduction of trade discount and freight from the price.
2. The appellants manufacture asbestos cement products. They have filed price list No. 18/83-84 under Pt. I on 15-11-1983 effective from 1-12-1983. The Assistant Collector without issuing a show cause notice approved the price by disallowing the claim of the appellants for a deduction of trade discount and freight from the price. The appellants made a representation to the Assistant Collector to reconsider the decisions which was rejected by him by a speaking order. On appeal the Collector dismissed the same against which an appeal was filed to this Tribunal.
3. This Tribunal disposed of this appeal as not maintainable against which a writ petition was filed in the High Court of Judicature, Calcutta. The Calcutta High Court allowed the writ petition and directed the Tribunal to dispose of the appeal on merits. Hence, the matter is before us.
4. The main contention of the appellants is that the appellants' claim in the price list deduction of trade discount of 5.73% of the sale price exclusive of duty while trade discount of 5% of the stockist price inclusive of duty was declared in the Circular and cash discount 1.72% of sale price exclusive of duty with cash discount of 1.5% of stockist price inclusive of duty. The said discount was claimed in accordance with the normal practice at the time of removal of goods.
These discounts were declared in the price list as well as in the contracts with the stockists/dealers. The buyers were well aware of the general trade discount allowed prior to removal of goods.
5. According ,to the appellants instead of taking the amount of trade discount in the sale bills, the practice is to make payment of consolidated amount of trade discount to each buyer in the month following that in which the sale was made by issuing a credit note. In view of the various decisions of High Court and also Supreme Court in Bombay Tyres International, 1984 (17) E.L.T. 329 (SC) it is submitted that they are entitled to the deduction from the sale price. The appellants also claimed deduction of freight from the sale price. The Collector held that it is not the case of the appellant that they are not giving trade discount at the end of the month but they are issuing by credit note. This action is not in confirmity with the provision of Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944.
Therefore, they are not entitled to the deductions in this regard.
Holding as above, he rejected the claim of the appellant. As regards the claim of the appellants in respect of freight he held that since the appellants have a price at the factory gate under Part I they are not entitled to the deduction of freight.
6. The appellants now in the grounds of appeal explained that the fact that the discount is given at a particular percentage is known to the customer and therefore in view of the judgment of the Supreme Court in Bombay Tyres International Pvt. Ltd. [1984 (17) E.L.T. 329 (SC)] they are entitled to the deduction of trade discount. He also submitted that the fact that they are giving discount by means of credit note does not in any way effect their claim for deduction.
7. Shri Satish Kumar, learned ]DR reiterated the order of the Collector (Appeals).
8. The Bombay High Court in the case of Ballarpur Industries v. Union of India 1987 (30) E.L.T. 267 considered the question whether trade discount granted by means of credit note, is an allowable deduction.
9. According to the learned Judges the ground that "since the manufacturer was giving additional discount by issuing credit notes the rejction of claim for deduction of additional discounts deserves to be struck down". Further under the clarificatory order of the Supreme Court as reported in [1984 (17) E.L.T. 239] which expressly holds that the discount need not be reflected in the invoices or be given at the time of delivery of goods.
10. In view of the above judgments, we allow the claim of the appellants for deduction of trade discount given by means of credit notes. No other decision is brought to our notice.
11. As regards the freight claimed by the appellants, it appears from the order of the Collector the Assistant Collector approved the price list under Part-I by including the cost of transportation. In other words, Part I price includes the cost of transportation. According to the judgment in Bombay Tyres International, the assessable value is to be determined by excluding the equalised freight. Therefore, the appellants are entitled to the deduction of equalised freight. Thus, order of the Collector disallowing the deduction of transportation is contrary to the judgment of the Supreme Court in Bombay Tyres International.
12. We, therefore, set aside the order of the Collector and allow the appeal.