2015 (5) TMI 462 - HC - VAT and Sales Tax

Valuation - Deduction on account of turnover discount - Classification of movement of goods against F from - interstate sale or not - Whether the VAT Tribunal fell into error in holding that the discounts on sales which are subject matter of the present appeals, were not deductible - Whether the VAT Tribunal fell into error in holding that the said sales were not inter-state sales within the meaning of expression under Section 3(a) of the Central Sales Tax Act, 1956 - Held that - In computing the turnover, the sales price received, or receivable, by the dealer is to be reduced to the extent of the cash discount accorded by him to the purchasers under the normal prevailing trade practices. Unlike some other statutes governing the Sales Tax (e.g. Kerala General Sales Tax Act 1963, to which we shall make a reference a little later), Delhi Sales Tax Act does not specifically refer to any discount other than cash discount . - Clearly, the approach of the Tribunal in the case at hand has been misdirected. The facts here are dissimilar to those prevailing in Indian Pistons Limited (1973 (7) TMI 95 - MADRAS HIGH COURT). That the provision contained in Section 2(m) of Delhi Sales Tax Act does not conceive of any deduction other than cash discount from the sale price on which the turnover is to be computed is of no consequence, inasmuch as, as explained by Supreme Court in Advani Oerlikon (1979 (10) TMI 194 - SUPREME COURT), the effect of turnover discount, which is in the nature of a trade discount in accord with the prevailing practices of the trade, enters the calculation anterior to the computation of the sale price collected or collectible from the purchasers. Tribunal having failed to comprehend the law laid down in Advani Oerlikon (supra), fell into error, because it proceeded on the wrong premise that the assessee had been in receipt of the sale price equivalent to the catalogue price from which it would subsequently allow reimbursement on the basis of turnover. Since the said assumption is factually incorrect and the turnover discount occurred apart from and outside the calculation of the sale price, rather prior to it , as in the case of Advani Oerlikon (supra), no question arises for deduction of any trade discount from the sale price. - turnover for the assessment years in question was correctly computed by the appellant herein after deducting the turnover discount granted to its dealers and rightly so declared in the returns. The assessing authorities have unjustly denied the benefit of deduction on such account. On inter-State sale - assessee (appellant) herein itself did not treat the transactions in question in its record as inter-State sales. The provision contained in Section 6A(1) of the Central Sales Tax Act, 1956 places the burden of proving a transfer of goods claimed to have been effected otherwise than by way of sale upon the dealer. The clause stipulates that if a dealer claims that he is not liable to pay tax in respect of any goods on the ground that the movement thereof from one State to another was occasioned by reason of their transfer by him to any other place of his business or to his agent or principal, as the case may be not by reason of sale, he is obliged to submit a declaration to such effect in the prescribed format along with evidence, inter alia, of dispatch of such goods. In terms of the provision, a presumption arises that the movement of goods was as a result of sale in the event of the failure on the part of the dealer to furnish such declaration. The format for declaration in terms of Section 6A is prescribed by Rule 12(5) of the Central Sales Tax (Registration and Turnover) Rules, 1957 in the shape of form F . Assessee itself treated the movement of goods from Faridabad to Delhi otherwise than by way of sale within the meaning of the clause contained in Section 6A of the Central Sales Tax Act and not only reflected it so in its stock registers but also, more importantly, made a formal declaration to such effect by issuing form F . No documents showing placement of orders by M/s Tyre Junction, Badarpur, Delhi for purchase of such goods have been shown the light of day and, therefore, there is nothing on which it can be inferred that the movement of goods from Haryana to Delhi had been occasioned by the sale of such goods in favour of M/s Tyre Junction. - The claim of the assessee about the inter-State sale of the goods, thus, remained unfounded and was rightly rejected by the authorities below including the Tribunal. We may add that if a different view has been taken by the assessing authorities in the State of Haryana or if any tax on such account has been collected from the appellant, it is for him to seek appropriate remedies there against such orders. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Admissibility of turnover discount as a deduction from taxable turnover.
2. Classification of certain sales as inter-state sales under Section 3(a) of the Central Sales Tax Act, 1956.

Issue-wise Detailed Analysis:

On Turnover Discount:

1. Background: The assessee, engaged in the manufacture and sale of tyres and tubes, provided a 1% turnover discount to its dealers, reflected in the invoices but credited quarterly through credit notes. The claim for deduction of this discount from the taxable turnover was rejected by the assessing authorities for various assessment years, on the grounds that the discount was not known at the time of invoicing and was not a cash discount.

2. Tribunal's Decision: The Tribunal upheld the Revenue's stance, ruling that only cash discounts are deductible under Section 2(m) of the Delhi Sales Tax Act, 1975, and that the turnover discount did not qualify as such since it was credited quarterly and not at the time of sale.

3. Assessee's Argument: The assessee argued that any concession in the price for commercial reasons should be considered a trade discount, deductible from the turnover. They contended that the turnover discount, though credited quarterly, effectively reduced the sale price and should be deductible.

4. Legal Precedents: The assessee relied on Supreme Court decisions like Advani Oerlikon (P) Ltd. and IFB Industries Ltd., which held that trade discounts, even if credited later, should be deductible as they ultimately reduce the sale price.

5. Court's Analysis: The court noted that the Delhi Sales Tax Act allows deduction only for cash discounts as per prevailing trade practices. However, it emphasized that the turnover discount, being a trade discount, should be deductible since it effectively reduces the sale price. The court found that the Tribunal misinterpreted the law by not considering the turnover discount as a trade discount.

6. Conclusion: The court held that the turnover for the assessment years in question was correctly computed by the assessee after deducting the turnover discount. The first question of law was answered in favor of the assessee, allowing the deduction of the turnover discount from the taxable turnover.

On Inter-State Sale:

1. Background: The assessee claimed that certain sales to M/s Tyre Junction, Badarpur, Delhi, should be classified as inter-state sales since the goods were transferred from Faridabad to Delhi and delivered en-route to the dealer. The Tribunal rejected this claim, treating these transactions as local sales.

2. Tribunal's Decision: The Tribunal ruled that the goods were transferred from Faridabad to Delhi against "F" forms and entered in the stock register before being sold to M/s Tyre Junction. It concluded that these transactions were local sales, not inter-state sales.

3. Assessee's Argument: The assessee argued that the goods were delivered en-route to M/s Tyre Junction pursuant to a contract, making these inter-state sales under Section 3(a) of the Central Sales Tax Act, 1956. They contended that the place of delivery is irrelevant if the movement of goods is in pursuance of a contract.

4. Legal Precedents: The assessee cited Supreme Court rulings like K.G. Khosla & Co. Ltd. and Sahney Steel and Press Works Ltd., which held that a sale occasioning the movement of goods from one state to another is an inter-state sale, regardless of where the property in the goods passes.

5. Court's Analysis: The court noted that the assessee had treated the transfer of goods from Faridabad to Delhi as a branch transfer, reflected in the stock registers and supported by "F" forms. There was no evidence that the movement was in pursuance of a contract with M/s Tyre Junction. The court emphasized that the burden of proving a transfer otherwise than by way of sale lies on the dealer, which the assessee failed to discharge.

6. Conclusion: The court upheld the Tribunal's decision, rejecting the claim of inter-state sales due to lack of evidence supporting the movement of goods being occasioned by a sale contract. The second question of law was answered against the assessee.

Final Judgment: The appeals were partly allowed. The court ruled in favor of the assessee on the issue of turnover discount but against them on the issue of inter-state sales. Each party was directed to bear their own costs.