2003 (5) TMI 495 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of Keo Karpin brand hair vitaliser and baby oil as medicines or cosmetics.
2. Allowability of quantity discount under rule 44 of the U.P. Trade Tax Rules.
3. Tax liability on turnover related to credit notes for the assessment year 1983-84.
4. Entitlement to reduction of tax on turnover related to "refused consignments."
5. Tribunal's competence to re-impose tax on a turnover quashed by the first appellate authority.
6. Interest on excess tax deposits.

Detailed Analysis:

1. Classification of Keo Karpin Brand Hair Vitaliser and Baby Oil:
The court had previously decided in other revisions that Keo Karpin brand hair vitaliser and baby oil are classified as medicines and are liable to be taxed as such. Therefore, this point was not reconsidered in these revisions.

2. Allowability of Quantity Discount:
The applicants argued that the quantity discount provided to purchasers should be allowable under rule 44 of the U.P. Trade Tax Rules. They provided detailed statements showing the discounts allowed. The assessing authority had rejected these claims, but the Tribunal remanded the cases back to the assessing authority for fresh determination.

The court reviewed various rulings, including:
- Shri Baidya Nath Ayurved Bhawan (P.) Ltd. v. Commissioner of Sales Tax, U.P.: Held that discounts can be in cash or kind if allowed on the sale price.
- State of Madras v. Jeewanlal (1929) Ltd.: Discount can be based on aggregate sales over time.
- Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Motor Industries Co.: Incentives promoting trade qualify as discounts.
- Commissioner, Sales Tax, U.P. v. Indian Farmers Fertilizers Co-operative Ltd.: Discounts in various forms relate to the sale price.

The court concluded that the applicants were not liable to be taxed on the turnover related to quantity discounts, and there was no need for remanding the cases.

3. Tax Liability on Turnover Related to Credit Notes:
The applicants contested the imposition of tax on a turnover of Rs. 27,268 for the assessment year 1983-84, arguing that these were "refused consignments" where delivery was not completed. The court agreed that rule 44(b) would not apply if delivery did not take place, thus no time limit for returns would be applicable. The Tribunal's decision to remand the case was incorrect, and the applicants were entitled to a reduction of these turnovers.

4. Entitlement to Reduction of Tax on "Refused Consignments":
The court found that the applicants provided evidence that the goods were returned without delivery, thus the six-month time limit under rule 44(b) did not apply. The Tribunal's rejection of the applicants' claims was incorrect, and the applicants were entitled to a reduction of the turnover related to refused consignments.

5. Tribunal's Competence to Re-impose Tax:
The applicants argued that the Tribunal was not legally competent to re-impose tax on a turnover of Rs. 8,642.98, which was quashed by the first appellate authority without a second appeal by the department. The court agreed, citing previous rulings:
- G.D. Steels & Gases Private Limited v. Commissioner of Trade Tax: Tribunal has no such powers.
- Allen Roller Flour Mills v. Commissioner, Trade Tax, U.P.: Tribunal cannot enhance tax without a second appeal by the Commissioner.

The Tribunal's order was quashed as it was against the provisions of section 10 of the Act.

6. Interest on Excess Tax Deposits:
The applicants requested interest on excess deposits. The court referred to the decision in Anuj Bricks v. State of U.P., which allows for interest on excess deposits. The court directed that interest at the rate of 12% per annum be allowed from the date of excess deposits till the date of refunds.

Conclusion:
All three revisions were allowed. The court directed the Trade Tax Tribunal to pass orders within two months and vacated the previous order restricting the Tribunal from deciding pending appeals. The applicants were granted interest at 12% per annum on excess deposits. No orders as to costs were made. Petitions allowed.