2016 (11) TMI 980 - HC - VAT and Sales Tax

Trade discount - authorised dealer of reputed motor vehicle manufacturers - applicant allows discount at the time of sale of vehicles to its customers as per the policy of the company, however, since the invoices are to be raised for full value of the vehicles, discount is allowed by issue of credit notes to the respective customers. Such discount being as per the company policy has the effect of reducing the sell price of the vehicle. The discount is described as rebate in the credit notes issued to the customers. The customer, thus, pays the net amount after reducing the rebate allowed to him by way of credit notes. The applicant, while filing its returns for the period under consideration, while computing its taxable turnover, claimed deduction of discount / rebate allowed by it to its customers - whether deduction claim of trade discount justified? Held that - no useful purpose would be served by calling upon the Tribunal to state the case and make a reference. Thus, to avoid unnecessary wastage of time, we think it appropriate to decide the matter. Since the facts are admitted and the law has been settled by their Lordship of the Supreme Court, we think that the question as raised by the assessee has to be answered in its favour. Resultantly, we do so. It is held that the Tribunal was not justified in rejecting the claim of the applicant by holding that the assessee is not entitled for the Trade Discount and, therefore, the orders of the second Appellate Authority dated 14/08/2007 and order passed in rejecting the application under Section 70(1) dated 28/07/2016 are liable to be set aside - the matter is remitted to the Board to decide the second appeal afresh and decide the same in accordance with law - application disposed off.

Summary

Issues involved:
Whether the Tribunal was justified in holding that the assessee is not entitled to the Trade Discount for the Assessment Year 2001-2002.

Analysis:
The applicant, a company dealing in motor vehicles, spare parts, and accessories, claimed deductions for discounts given to customers by way of credit notes. The Assistant Commissioner disallowed the deductions, stating that the discounts could not be treated as cash discounts since they were given after issuing bills through credit notes. The First Appellate Authority upheld this decision, relying on previous judgments. The applicant then appealed to the M.P. Commercial Tax Appellate Board, which also upheld the disallowance, stating that the discounts given were in the nature of trade discounts, not cash discounts.

The applicant then sought a statement of the case to the High Court, which was rejected. The applicant argued that the deductions should be allowed based on the law laid down by the Supreme Court in the IFB Industries Ltd. case. The High Court noted the relevant portions of the Titan Industries Ltd. case, which emphasized that discounts through credit notes issued after a sale, even if not mentioned in the sale voucher or bill, are permissible. The High Court further referenced other cases that supported the deduction of discounts allowed as per ordinary trade practice through credit notes without showing them in the sale bill.

The Government Advocate agreed that the issue was covered by the Titan Industries Ltd. case. The High Court, considering the latest decision, held that the Tribunal's view could not be sustained. The High Court decided in favor of the applicant, setting aside the orders of the Second Appellate Authority and the rejection of the application under Section 70(1). The matter was remitted to the Board to decide the second appeal afresh in line with the law laid down by the Apex Court and the decision in the Titan Industries Ltd. case.

In conclusion, the High Court held that the Tribunal was not justified in rejecting the applicant's claim for the Trade Discount, setting aside the previous orders and remitting the matter for a fresh decision based on the established legal principles.