S.V. Maruthi, Member (J)

1. The dispute relates to the recovery of duty short levied.

2. The appellants manufacture among other products different types of agro-chemicals classifiable under T.I. 68 of the CET. For the period commencing from 19-10-1977 to 3-4-1978, four demand notices were issued proposing to recover duty on the ground that trade discounts granted were not uniform and varying from 2.5% onwards and the balance of discount passed on to the distributors as overriding commission are not permissible under Section 4 of the Central Excises Salt Act, 1944. The four show cause notices are as follows:

(1) Date of show cause notice 31-12-1977, for the period from 22-8-1975 to 31-3-1976.

(2) Date of show cause notice 19-10-1977, for the period 1-4-1976 to 31-3-1977.

(3) Date of the show cause notice 3-4-1978, for the period 1-4-1977 to 30-9-1977.

(4) Date of the show cause notice 1-10-1977 to 28-2-1978.

On receipt of the reply, the demands are confirmed by the Assistant Collector. On appeal, the Collector confirmed the order of the Asstt. Collector. Hence, the appeal before us.

3. The Asstt. Collector held that the demand prior to 1-1-1976 was barred by time and the rest of the demands are confirmed. The Collector held that the accounting year followed by the appellants is the calendar year i.e. Jan. to Dec. Therefore, if it is after the amendment of Rule 10 under Notification No. 167/77 dated 6-8-1977, the show cause notices could be issued within one year from the date of closing of the accounting year and therefore, the demands are within the period of limitation except the demand prior to 1-1-1976.

3A. As regards the commission paid to the stockists, the Collector relying upon the reply given by the appellants held that the stockists are related persons. As regards the overriding commission, he held that since the commission is not given either to the customer or the buyer but to the stockists and secondly, that it is not given at the time of removal of goods sold to the customers, it cannot be given as it cannot be treated as trade discount.

4. The main contention of Shri Habbu is that the show cause notices are barred by limitation. The distributors are not the related persons of the appellants. The overriding commission is nothing but discount which should be allowed in view of the language used under Section 4. He also explained that the total discount declared in the price list is 10% and 7.5% out of which 7.5% minimum is given to the customer and the differential discount is given to the stockists. Similarly in a case where the discount declared in the price list is 7.5%, 2.5% is given to the customer and 5% differential discount is given to the stockists. This is on account of the fact that the manufactured products are distributed throughout the country through a network of stockists/distributors which are located in different regions. The commission given to these stockists was 10% to 7.5% depending upon whether the pesticides were non-superficial or superficial. If the goods were sold directly to the customers in the region and a small discount was given to the customer, a balance of the discount was passed on to the stockists in the region as his overriding commission. It was also submitted that the appellants received 87.5% or 85% of the price in view of the over-riding commission given to the customers. Further he pointed out that the appellant is getting for sale of its goods the invoice price minus the discount declared in the price list and therefore, the assessable value should be the invoice price minus the discount. In support of his contention, he relied upon the order of this Tribunal in Electrical Products Corpn. v. C.C.E. - MANU/CE/0353/1986 : 1989 (43) E.L.T. 70 and he also submitted that the above order was confirmed by the Supreme Court in 1991 (54) E.L.T. A92.

5. Shri Satish Kumar submitted that the so-called discount is not discount but is in the nature of service charges, therefore, they are no