2003 (3) TMI 671 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the order passed by the Commissioner of Commercial Taxes, exercising the revisional powers under section 20(1) of the Andhra Pradesh General Sales Tax Act, 1957, revising the order of the Appellate Deputy Commissioner, is just and proper.
2. Whether the quantity rebate or discount allowed by the assessee through credit notes can be excluded from the turnover.

Issue-wise Detailed Analysis:

1. Revisional Powers of the Commissioner:
The primary issue is the legitimacy of the Commissioner's exercise of revisional powers under section 20(1) of the Andhra Pradesh General Sales Tax Act, 1957. The Commissioner revised the order of the Appellate Deputy Commissioner, who had allowed the assessee's claim for exemption of turnover represented by the discount allowed through credit notes. The Commissioner contended that the assessee did not produce evidence of any scheme or contract with the dealers for allowing such rebates, thereby justifying the revision.

2. Quantity Rebate or Discount:
The assessee, dealing in fertilizers, claimed an exemption for a turnover of Rs. 1,87,89,413, representing discounts allowed to dealers via credit notes. The assessing officer disallowed this claim, stating that the discount was not reflected in the bills at the time of sale. However, the Appellate Deputy Commissioner accepted the claim, noting the practice of issuing quantity rebates at the end of the year based on the quantity lifted by customers.

Relevant Legal Provisions and Precedents:
Clause (s) of section 2(1) of the Act and Rule 6(1)(a) of the Andhra Pradesh General Sales Tax Rules, 1957, were pivotal in this case. These provisions define turnover and allow for the deduction of discounts from the turnover, provided they are in accordance with the regular practice of the dealer or contractual terms.

The Appellate Deputy Commissioner relied on the decisions of the apex Court in Deputy Commissioner of Sales Tax (Law) v. Motor Industries Co. [1983] 53 STC 48 and the Andhra Pradesh High Court in State of Andhra Pradesh v. T.V. Sundaram Iyengar & Sons Ltd. [1987] 65 STC 41. These cases established that discounts, even if not reflected in the bills at the time of sale but allowed as per trade practice or agreement, can be excluded from the turnover.

Arguments by the Assessee:
The assessee argued that the quantity rebate was a competitive strategy to establish market presence and was evidenced by credit notes issued to customers. The Appellate Deputy Commissioner verified the credit notes register and found no discrepancies. The assessee contended that the burden of proof in revisional proceedings lies with the Department, which failed to provide contrary evidence.

Arguments by the Special Government Pleader:
The Special Government Pleader contended that the dealer must prove the existence of a discount scheme or agreement with customers. The Commissioner of Commercial Taxes found no such evidence, justifying the revision of the Appellate Deputy Commissioner's order.

Court's Analysis:
The Court noted that the facts were undisputed, and the Appellate Deputy Commissioner had accepted the practice of issuing quantity rebates based on the quantity lifted by customers. The Commissioner's revision was based on the absence of a documented scheme or agreement, but the Court found that the dealer had provided sufficient evidence, including a note from December 1986, indicating a decision to allow rebates due to competitive market conditions.

The Court referenced several precedents, including Motor Industries Co. [1983] 53 STC 48 and T.V. Sundaram Iyengar & Sons Ltd. [1987] 65 STC 41, which supported the exclusion of trade discounts from turnover if they were part of regular practice or agreement.

Conclusion:
The Court concluded that the Commissioner of Commercial Taxes did not justify revising the Appellate Deputy Commissioner's order, as no adverse material was brought on record. The evidence provided by the assessee indicated a practice of allowing quantity rebates, and the Commissioner's view was not in accordance with the law.

Judgment:
The impugned order of the Commissioner of Commercial Taxes was set aside, and the order of the Appellate Deputy Commissioner dated July 20, 1990, was restored. The special appeal was allowed with no costs.

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