K.L. Rekhi, J.

1. The appellants are not represented today. By their letter dated 8.4.1988, they have requested us to decide the appeal on merits in their absence. Accordingly, we have heard the learned representative of the department and examined the record, particularly the written submissions made by the appellants.

2. From their factory all the goods were removed to their sales depots and further disposal of the goods took place only from these sales-depots. Their prices were for destination. They had appointed three authorised dealers. These authorised dealers had entered into special agreement with the appellants. These authorised dealers were given 25% plus 15% (cumulative 36.5%) discount on the purchases made by them. In addition, these three authorised dealers procured orders from their buyers (consumers/dealers) and transmitted these orders to the appellants. The appellants invoiced and consigned the goods direct to these buyers of the authorised dealers. The buyers were given a varying discount of amount which was not below 25%; it was, in some cases, more than 25%, depending upon the instructions of the concerned authorised dealers. The difference between the discount of 36.5% and the lesser discount actually granted to a buyer was passed on by the appellants to the concerned authorised dealer as commission. The Appellate Collector has also mentioned that the appellants took interest-free deposit of Rs. 5 lakhs from their authorised dealers which represented substantial monetary benefit to the appellants over and above the purchase price for the goods. The lower authorities have allowed only the minimum discount of 25% which was uniformly granted to all purchasers of the appellants' goods. The appellants are in an appeal against this order and, in addition, they pray for deduction of post-manufacturing expenses as their prices were ex-depots and FOR destination.

3. We have given the matter our careful consideration. There were clearly two tiers of customers in the sales patterns of the appellants. In the first tier were the three authorised dealers at Kakinada, Bombay and Calcutta who got 36.25% discount over the list prices. In the second tier were the buyers of these three authorised dealers. These buyers included consumers of the motor vehicle parts as well as dealers. The lower authorities have taken the minimum discount given to the buyers in the second tier. In other words, the higher sale price charged from the buyers in the second tier has been taken as the basis. Under Section 4 of the Central Excises and Salt Act, 1944, this could be done only if the authorised dealers in the first tier were proved to be' related persons'. But such is not the case of either the lower authorities or of the learned representative of the department before us. Nor is there any evidence on record to show that the three authorised dealers of the appellants were related persons in terms of Section 4(4)(c) of the Act. The authorised dealers were, no doubt, bound by written agreements with the appellants. But these agreements contained the usual terms and conditions as we commonly see in the dealership agreements for machinery-items. In the circumstances, we hold that the three authorised dealers of the appellants were independent buyers and the prices charged to them could not be ignored.

4. We would have allowed the full discount of 36.25% given to the three authorised dealers but for the fact that it is on record that the appellants had taken interest free deposit of 5 lakhs at least from one of the three authorised dealers. The appellants plead that their Bombay and Calcutta authorised dealers had to maintain adequate stocks of the appellants' goods while the Kakinada authorised dealer, being located at the same place where the appellants' factory was situated, could replenish his stock in no time and hence was exempted from the condition of maintaining adequate stocks and it was in lieu of this exemption, and with a view to