ORDER

1. This is a statutory appeal filed by the Revenue under Section 35-L of the Central Excise Act, 1944 (hereinafter referred to as "the Act") against the Final Order No. 577/2000-A dated 12-7-2000 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (for short "the Tribunal") in Appeal No. E/1294/2000A whereby the Tribunal has set aside the order of the Commissioner (Appeals); the original authority and held that the commission paid by M/s DCM Textiles, the respondent herein, to its dealers was deductible as a trade discount for the purposes of computing assessable value of cotton yarn.

Facts

2. During the scrutiny of• records for finalisation of provisional assessment the authorities observed that deduction claimed in respect of the commission paid to its dealers by the respondent was not permissible as the appointed dealers were the selling agents and not the dealers. Accordingly, a show-cause notice dated 6-11-1996 was issued calling upon the respondent assessee to debit the differential duty. The assessee submitted its reply and disputed the Revenue's stand and submitted that the commission paid to the dealers was deductible being a trade discount for computing assessable value of the cotton yarn.

3. The Assistant Commissioner confirmed the demand of Rs 4,68,766 relying upon a judgment of this Court in Coromandel Fertilizers Ltd. v. Union of India by disallowing the deduction in respect of commission amounting to Rs 81,52,442 paid to the dealers by the respondent assessee attributable to their sale promotion activities as commission. It was further held that the deduction in respect of commission paid to the dealers was not permissible deduction as the appointed dealers were the selling agents of the respondent for sale of cotton yarn on behalf of the respondent.

4. Aggrieved by the aforesaid order, the respondent assessee filed an appeal to the Commissioner (Appeals), New Delhi. The Commissioner (Appeals) vide its order dated 28-2-2000 dismissed the appeal on the ground that the commission paid was of the nature of an incentive for effecting higher sales and going by the nature of commission, it could not qualify as a trade discount within the meaning of Section 4(4)(d)(ii) of the Act, as it stood then.

5. Feeling aggrieved, the respondent assessee preferred an appeal before the Tribunal. The Tribunal, relying upon the terms of the agreement entered into between the parties, allowed the appeal by the impugned order. It was observed that the sale made by the respondent to the dealers was on "principal-to-principal basis" and the commission paid to the dealers was in the nature of trade discount and the respondent assessee was entitled to deduct the same while calculating the net assessable value.

6. The Revenue, being aggrieved, has filed the present appeal.

7. Counsel for the parties have been heard at length.

8. The respondent has entered into different but similar agreements with its dealers in connection with the sale of cotton yarn manufactured by it and one of the agreements was produced during the course of proceedings before the original authority for the purposes of ascertaining the terms and conditions at which the goods were supplied by the respondent to its dealers. The agreement purports to be a dealership agreement. The relevant clauses of the agreement are reproduced hereunder:

"2. That the cotton yarn will be delivered to the dealer on his requisitions placed in the Company's office at Delhi, ex-Company's Delhi godown subject to availability of the stock with the Company in their said godown.

3. That the dealer shall be wholly and solely responsible for making full payment to the Company of all stocks of cotton yarn received from the Company.

8. That the Company shall pay the dealer commiSSIOn of 1.5% including brokerage, if any, on the net value of the sale. The commission payable shall be worked out at the end of every quarter and remitted to the dealer. . ..

9. The dealer shall be paid ½% c