2015 (9) TMI 1610 - HC - VAT and Sales Tax

Whether quantitative discount which the petitioner has claimed as trade discount could be included in the taxable turn over to the petitioning Company or not for the purpose of assessment under the Act? Held that - the petitioner had not received any amount for the supply of products free to its customers under the scheme as referred to above the said discount could not have been added to the taxable turn over of the petitioner no sale of goods within the meaning of Section 2(t) of the Act having been taken place and no sale price having been received by the petitioner. The respondents were not justified in including the quantitative discount/trade discount allowed by the Company to its customers to his taxable turn over for the assessment year 2000-2001. The said discount to the tune of 20, 68, 257/- has been wrongly assessed to be included in the taxable turn over. Application allowed.

Summary

Issues Involved:
1. Whether quantitative discount given by the petitioner as trade discount can be included in the taxable turnover for the purpose of assessment under the Bihar Finance Act, 1981.

Detailed Analysis:

Issue 1: Inclusion of Quantitative Discount in Taxable Turnover

Background:
This writ application under Article 226 of the Constitution of India seeks the quashing of the assessment order and demand notice dated 27.06.2002. The petitioner, a private limited company engaged in the manufacture and sale of medicines, granted trade discounts to its customers. For the assessment year 2000-2001, the respondent authorities included the quantitative discount of Rs. 20,68,257/- in the taxable turnover for the first time.

Petitioner's Argument:
The petitioner contends that the quantitative discount, which was given free on the purchase of specified quantities of products, should not be included in the taxable turnover. The petitioner argues that no sale price was charged for the free products, and thus, it does not constitute a sale under the Act. The petitioner relies on a Division Bench decision in M/s Mapra Laboratories Pvt. Ltd. Vs. The State of Bihar & Ors., which supports the exclusion of such discounts from taxable turnover.

Respondent's Argument:
The State of Bihar argues that the trade discount given by the petitioner did not pass on to the end consumers and was limited to wholesalers and retailers. They assert that the free products were not shown as tax-paid at the time of sale to the consumer. The respondents also claim that the petitioner issued Form-IX C certifying that the goods sold to wholesalers and retailers were tax-paid, including the free products, thus justifying the inclusion of the discount in the taxable turnover.

Legal Definitions:
The court examined the definitions of "sale" and "sale price" under Sections 2(t) and 2(u) of the Bihar Finance Act. According to these definitions, a sale must involve a transfer of property in goods for cash, deferred payment, or other valuable consideration. The sale price includes any amount charged by the dealer for anything done in respect of the goods at the time of or before delivery to the buyer, excluding cash discounts if shown separately.

Court's Analysis:
The court noted that for a transaction to constitute a valid sale, there must be mutual assent, transfer of property, and consideration in money. The court referred to the Supreme Court's decision in The Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes) V. M/s. Advani Coorlikon (P). Ltd., which distinguished between cash discount and trade discount. The court also referred to Anant Raj Industries Ltd. Vs. Commissioner of Central Excise, which dealt with quantity discounts dependent on the purchaser buying a certain quantity of goods.

Conclusion:
The court concluded that since the petitioner did not receive any amount for the free products supplied under the discount scheme, the discount could not be added to the taxable turnover. The court held that no sale of goods within the meaning of Section 2(t) of the Act had taken place, and no sale price was received by the petitioner. The Division Bench decision in M/s Mapra Laboratories Pvt. Ltd. was found to be applicable, supporting the petitioner's case.

Judgment:
The court set aside the assessment order and the demand notice dated 27.06.2002, issued by the Assistant Commissioner, Sales Tax, Special Circle, Patna. The writ application was allowed, and there was no order as to costs.