1998 (7) TMI 656 - HC - VAT and Sales Tax

Summary

Issues:
Whether trade discount/cash discount given by a dealer can be included in the taxable turnover.

Analysis:
The appellant, a manufacturer of PVC insulated wires and cables, declared gross turnover and taxable turnover for a specific assessment year. The assessing authority added a discount amount to the total turnover, resulting in a higher taxable turnover, which led to the proposal of turnover tax. The appellant challenged this levy under the Karnataka Sales Tax Act, and the first appellate authority ruled in favor of the appellant, excluding the discount amount from the taxable turnover. However, the Additional Commissioner of Commercial Tax, Belgaum, sought to revise this decision, stating that deductions are allowable only when they form part of the turnover. The revisional authority concluded that the discount should be included in the turnover, contrary to the first appellate authority's decision.

The appellant argued that trade discount/cash discount does not form part of the sale price and should not be included in the total turnover. The distinction between trade discount and cash discount was highlighted, with trade discount being a deduction from the catalogue price allowed by wholesalers to retailers. The Supreme Court precedent was cited, emphasizing that trade discount should not be included in the taxable turnover. The definitions of "sale" and "turnover" under the Act were examined, along with Rule 6(1)(a) and 6(1)(b), which determine the total and taxable turnover. It was established that trade discount given by the dealer should not be considered as part of the taxable turnover, as it does not represent the price of the goods sold.

The judgment accepted the appeal, setting aside the Additional Commissioner's order and upholding the first appellate authority's decision. The inclusion of trade discount in the taxable turnover was deemed incorrect, leading to a lower taxable turnover amount and the non-levy of turnover tax. The ruling emphasized that only amounts representing the actual sale price or purchase price should be considered as turnover, excluding discounts given by the dealer. Ultimately, the appeal was allowed with no costs incurred.