Trade discount and cash discount are admissible in the determination of the manufacturing cost of articles for purposes of levy of excise duty.

RAMANUJAM, J

In all these appeals, the common question that arises for consideration is as to whether the respondents in each of these appeals is entitled to exclude the trade discount as well as cash discount in the determination of the manufacturing cost of articles for purposes of levy of excise duty.

2.Since the facts in all these writ appeals are similar, it is sufficient to refer to the facts in one case, viz. Writ Appeal No. 435 of 1978. The respondent in each of these appeals is a manufacturer of embroidered cotton fabrics. They are assessable to excise duty under Item 1911 of the First Schedule to the Central Excises and Salt Act, 1944 hereinafter referred to as the Act. Up to 30th November, 1973 the respondents were paying Central Excise duty atad valorembasis. From 1st December, 1973 they opted to pay duty at compounded rates under Rule 96J of the Central Excise Rules. Under Section 4(a) of the Act before its amendment the value of an article is the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of removal of the articles from the factory or any other premises of manufacture or production for delivery at the place of manufacture, or if a wholesale market does not exist for such article at such place, at the nearest place where such market exists. The said section contained an Explanation which provided that for determining the price of any article, no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of removal of the article from the factory or other premises aforesaid. For the purpose of assessment of duty of the embroidered fabrics manufactured by the respondents, they had submitted price lists as required by Rule 173 C of the Central Excise Rules excluding the trade discount which they were allowing. However, the concerned Assistant Collector of Central Excise allowed a trade discount of 4% to all purchasers in all States and another cash discount of 3% towards prompt cash subject to the condition that it is established in each case of clearance that the discounts were allowed uniformly to all purchasers. However, on the ground that the discount allowed is not uniform, a demand was issued under Rule 10A of the Central Excise Rules, 1944 under which the respondents were called upon to show cause and not satisfied with the explanation given by them the Assistant Collector of Central Excise held that the respondents are not eligible for any trade discount.

3.Aggrieved by the order of the Assistant Collector, the respondents preferred an appeal to the Appellate Collector. However, the said appeal was rejected on 12th December, 1973. Thereafter, a revision was filed before the Government of India who by their (order) dated 29th August, 1975 rejected the same. It is at that stage the respondents have come before this Court seeking to quash the order of the Government of India affirming the orders passed by the authorities below. The ground on which the trade discount which was originally allowed was withdrawn by the authorities is only on the basis that the trade discount has not been uniformly allowed to all the purchasers. One further ground that was urged at the stage of the writ petition on behalf of the Department is that the trade discount can be allowed only if it is given at the time of the sale of the goods, that is, at the time of the removal of the goods and not long afterwards. Mohan, J., dealing with these two reasons for withholding the allowance given for trade and cash discount held that there is no requirement for the application of the Explanation to Section 4 that the trade discount must be uniform and that trade discounts which were in fact allowed cannot be ignored merely because it was allowed under credit notes. As there is no requirement under the law that such discount must be given at the time of sales, and it matters very little whether the tra