2014 (9) TMI 337 - HC - VAT and Sales Tax

Disallowance or allowance of trade discount under the law - period of limitation in passing order of revision - Held that - There is no reason to hold that a power of review had been exercised in view of a wrong section being quoted in the order. In his capacity as a superior authority, the Senior Joint Commissioner revised the order of the Assistant Commissioner. Such exercise of power was made in terms of the provisions of section 80, read with sub-rule (3) of rule 244 and rule 245 of the West Bengal Sales Tax Rules, 1995. The order of re-assessment passed on March 22, 2004 was revised on February 9, 2010. It is evident from the record itself that such power under section 80 of the West Bengal Sales Tax Act, 1994 read with rule 245 of the West Bengal Sales Tax Rules, 1995 had been exercised within the stipulated period of six years as prescribed in the proviso to rule 245 of the West Bengal Sales Tax Rules, 1995. The order of revision, therefore, cannot be called to be barred by limitation. The question of discount by way of credit notes was not dealt with in proper perspective by the assessing authority. The settled principle of trade discount was not at all applied in allowing the discount. It was an apparent mistake on the face of the record. There being glaring irregularity and illegality on the face of the order of reassessment passed by the Assistant Commissioner, it was modified in the order of revision passed by the Senior Joint Commissioner, Commercial Taxes, Corporate Division in suo motu revision Case No. SMR-17/CD/09-10. The Senior Joint Commissioner acted within the ambit of power under section 80 of Act, 1956 and sub-rule (3) of rule 244 and rule 245 of the West Bengal Sales Tax Rules, 1995. The law relating to trade discounts has also been properly discussed. The well reasoned judgment, therefore, does not call for any interference - Decided against assessee.

Issues Involved:
1. Suo motu revisional order by the Senior Joint Commissioner.
2. Claim for refund of excess payment of tax.
3. Legitimacy of trade discount by way of credit notes.
4. Limitation period for exercising revisional powers.
5. Doctrine of merger and its applicability.
6. Competence of the Senior Joint Commissioner to exercise revisional powers.
7. Interpretation of "sale price" and "turnover of sales" under the West Bengal Sales Tax Act, 1994.

Issue-wise Detailed Analysis:

1. Suo Motu Revisional Order by the Senior Joint Commissioner:
The petitioner challenged the suo motu revisional order passed by the Senior Joint Commissioner, Commercial Taxes, Corporate Division, under section 8 of the West Bengal Taxation Tribunal Act, 1987. The Senior Joint Commissioner issued a notice in form 55, evincing interest in levying tax on the sum of Rs. 2,89,45,873, previously allowed as additional discount. The petitioner argued that the revisional power should not have been exercised after nearly ten years, as the issue had attained finality.

2. Claim for Refund of Excess Payment of Tax:
The petitioner, M/s. Crompton Greaves, dealing in electrical and electronic items, was assessed to tax for four quarters ending March 31, 1997. The assessment led to notices of demand for payment of significant sums under both the West Bengal Sales Tax Act, 1994, and the Central Sales Tax Act, 1956. Subsequent reassessment acknowledged excess payment of taxes, and the petitioner requested a refund. The Assistant Commissioner asked the petitioner to file indemnity bonds for the refund claims, which were furnished. However, no refund was issued, and instead, a notice for additional tax was served.

3. Legitimacy of Trade Discount by Way of Credit Notes:
The petitioner argued that trade discounts allowed in the form of credit notes were legitimate and had been accepted in the initial assessment. The Senior Joint Commissioner, however, rejected this claim, stating that the amount of Rs. 2,89,45,873 should be added to the gross turnover. The petitioner contended that the trade discount was a settled practice and should not be modified based on a different interpretation of the law.

4. Limitation Period for Exercising Revisional Powers:
The petitioner argued that the revisional powers were exercised beyond the stipulated period of four years from the date of assessment, as per section 83 of the West Bengal Sales Tax Act, 1994, and rule 249 of the West Bengal Sales Tax Rules, 1995. The respondents contended that the revision was made within six years from the order of assessment, as allowed under rule 245 of the West Bengal Sales Tax Rules, 1995. The court found that the revisional powers were exercised within the six-year limitation period.

5. Doctrine of Merger and Its Applicability:
The petitioner argued that the initial assessment order had merged with the appellate order passed by the Deputy Commissioner, and thus, the Senior Joint Commissioner had no authority to review the order. The court held that following the remand order, the entire initial assessment order was set aside, and a fresh assessment was made. Therefore, the doctrine of merger did not apply, and the revisional powers were exercised within the limitation period.

6. Competence of the Senior Joint Commissioner to Exercise Revisional Powers:
The petitioner contended that the Senior Joint Commissioner acted beyond his authority in revising the order. The court found that the Senior Joint Commissioner acted within the ambit of power under section 80 of the West Bengal Sales Tax Act, 1994, and rule 245 of the West Bengal Sales Tax Rules, 1995. The exercise of revisional powers was legitimate and within the prescribed period.

7. Interpretation of "Sale Price" and "Turnover of Sales" under the West Bengal Sales Tax Act, 1994:
The court discussed the definitions of "sale price" and "turnover of sales" as provided in sections 2(31) and 2(40) of the West Bengal Sales Tax Act, 1994. The court referred to precedents, including the Supreme Court's decision in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) v. Advani Oerlikon (P.) Ltd., which held that trade discounts should be deducted from the sale price. However, in this case, the court found that the trade discount was not reflected in the invoices at the time of sale, and the full price with sales tax and surcharge was realized without any mention of discount. Therefore, the claim for trade discount by way of credit notes was not justified.

Conclusion:
The court upheld the revisional order passed by the Senior Joint Commissioner, dismissing the petitioner's application. The court found that the revisional powers were exercised within the limitation period, the doctrine of merger did not apply, and the claim for trade discount by way of credit notes was not justified. The judgment emphasized that the revisional authority acted within its powers, and the well-reasoned judgment did not call for any interference.

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