U.P. INSTRUMENTS LTD. Vs. CCE

JUDGEMENT

(1.) THE appellant herein is a Government Limited company engaged in the manufacture of Water meters. Its main consumers are Government departments like Water Works Department, District Corporations and other local bodies of various states who consume about more than 95% of the appellants' products. Only 5 -6% of the water meters manufactured by the appellants are sold through their dealers in various States to whom a trade discount is provided as per the trade practice. A security deposit of Rs. 2,000/ - each is taken from these dealers and these deposits are in the nature of security to cover losses likely to be caused due to non -compliance of sale obligations or other negligent or wrongful acts by the dealers. The department was of the view that since the appellants were getting a security deposit from their private dealers, it was in the nature of refund of trade discounts and therefore the trade discounts were not to be deducted from the assessable value of the appellants' products. A show cause notice was issued for recovery of Rs. 14,210.35 being the discount allowed by the appellants during the period from May to October, 1985. The Additional Commissioner upheld the charges contained in the show cause notice and confirmed the demand. Hence this appeal. We have heard Shri T.K. Srivastava, ld. counsel and Shri K. Srivastava, ld. SDR.

(2.) WE have perused the impugned order. The show cause notice proceeds to demand duty (confirmed by the adjudicating authority) for the reason that the interest rate on money deposit was higher and therefore the discounts were refundable by way of interest on the security deposits which contravened the provisions of Section 4(4)(d)(ii) of Central Excise Act, 1944 and Proviso (iii) and (iv) of the Notification No. 120/75 dated 30.4.1975. Ld. counsel has been able to satisfy us with reference to the letter dated 12.12.1985 written to the Department regarding trade discounts being offered uniformly to all the private dealers and therefore, we are proceeding on the basis that there was a uniform trade discount. Even the adjudicating authority has not rendered any finding that the trade discount was being offered only to some of the private dealers and not to some other private dealers. Therefore, the only question before us is whether the security deposit is to be treated as a refund of the trade discounts granted uniformly to the present dealers. We find that the security deposit is uniform - -Rs. 2,000/ - from every dealer Further, the deposit is taken from the private dealers as soon as they are appointed a$ dealers and even before actual supply of water meters from the appellants takes place. We, therefore, do not agree with the adjudicating authority that the trade discount had a linkage to the security deposit and that there was any extra commercial consideration available to private dealers. Therefore, the price charged from the private dealers is to be treated as the bona fide on normal price and the discount is admissible under the proviso to Section 4. In this view of the matter, we set aside the impugned order and allow the appeal.