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TMI Blog2006 (7) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... the wholesale dealers and retail dealers, according to the practice, normally prevailing in the trade. The normal trade practice was to allow discount for prompt cash payments, target achievements, etc. The above discounts, allowed as a regular trade practice, were being deducted from the total turnover, as per the provisions of the Kerala General Sales Tax Act. Even if the discount was allowed not at the time of actual sale, but on a later date, say, at the end of the month, which did not make any difference, it was treated as a trade discount and deducted from the total turnover. The said practice, concerning diminution of the sale price by the grant of discount, was recognised and the benefit was enjoyed by the dealers under the KVAT Act, 2003 also. The definition of "sale price" contained in section 2(xliv) of the said Act reads as follows: "'sale price' means the amount of valuable consideration received or receivable by a dealer for the sale of any goods less any sum allowed as cash discount, according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods or services at the time of or befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice and the buyer pays only the amount reduced by such discount; or any amount refunded in respect of goods returned by customers shall not be included in the turnover." With the introduction of the said amendment, discount which can be deducted from the turnover is the one, included in the tax invoice. "Tax invoice", as per the definition in section 2(xlix), includes a bill of sale containing such particulars as may be prescribed. The petitioner, bona fide believing that exemption will be granted to the discount allowed, filed the monthly returns accordingly. The second respondent-assessing authority issued exhibit P1 series notices, proposing to reject the returns filed by it. The petitioner filed exhibit P2 reply. While so, the third respondent issued exhibit P3 pre-assessment notice under section 24 of the KVAT Act, 2003. The petitioner filed exhibit P4 detailed objection. It is also submitted that after the introduction of the amendment, the petitioner is showing the discount allowed by it in the tax invoice itself. The petitioner further submits that denial of the benefit of trade discount, while computing turnover, for the reason that it is not included in the bill of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the third respondent, in respect of the above period, rejecting exhibit P11 reply, submitted by the petitioner. W.P. (C) No. 16174 of 2006: The petitioner herein challenges the amendment to clause (ii) of Explanation III to section 2(lii) of the KVAT Act and also Explanation VII to the said section. Since the main challenge in these writ petitions was to a statutory provision, the respondents did not file any counter-affidavit. Heard the learned counsel on both sides. Sri. C. Natarajan, Senior Counsel, Dr. K.B. Mohammedkutty, Senior Counsel, and learned counsel M/s. K. Srikumar, Premjit Nagendran and A. Kumar addressed arguments on behalf of the writ petitioners. Sri. Raju Joseph, learned Special Government Pleader (Taxes) appeared for the State. The learned counsel for the petitioner submitted that the trade discounts granted by the petitioners to their dealers can, never, be treated as part of the sale price, for the reason that the discount is allowed by issuing credit notes during the month end or subsequently. The same cannot be included in the sale price, for the reason that the discount was not shown in the bill of sale. The legislative entry 54 of List II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of tax invoice is an inclusive definition. It includes bill of sale and ancillary documents to the invoice. The Explanation cannot restrict the provisions like the definition clauses for sale, sale price, turnover, etc. Price has a definite legal connotation and it is an essential component of sale. So, the Legislature cannot artificially define price. Such a definition will render the provision unconstitutional. In support of the above submission, reliance is placed on the decisions in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 STC 353 (SC); AIR 1958 SC 560 and McDowell and Company Ltd. v. State of Kerala [2002] 10 KTR 652. A few decisions under the Central Excise Act were also cited, to show that trade discount is excluded, to arrive at wholesale price. The learned Senior Counsel Dr. K.B. Mohammed Kutty also supported the above contentions. The learned counsel further submitted that the requirement of showing discount in the tax invoice was not a requirement between the period April 1, 2005 and August 28, 2005. Therefore, the retrospectivity given to the amendment will seriously prejudice the writ petitioners. It is something impossible of performanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the tax invoice. The dealer, who purchases goods from the manufacturer when makes sale to the retailers, collects tax on the basis of the selling price and from the tax, so collected, the input tax already paid by him, is deducted and the balance alone is paid to the State. The retailer, who effects sale to the consumer will collect tax, on the basis of his selling price and after adjusting the tax paid by him as input tax, the balance is paid to the State, as output tax. Thus, from the chain of events, it can be seen that the tax paid by the last seller alone, is received by the State, as the payments made by the earlier dealers are reimbursed to them, from the tax collected by them. The learned Special Government Pleader further points out that cement, being a perishable commodity, it cannot be stocked for long. Every month, there will be a lot of purchases and sales. By the time, the discounts are received at the end of the month or quarter or year, the stock is already sold out and tax is collected from the consumer. So, if discounts are allowed after the sale is effected, the differential tax will be retained by the dealer/manufacturer. No dealer can retain the tax c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation newly introduced to clause (ii) of Explanation III to section 2(lii), in no way, runs counter to the provisions contained in the Sale of Goods Act, especially, in view of the definition of "price" contained in section 2(10) of the Sale of Goods Act, 1930. He further points out that the decisions relied on by the learned counsel for the petitioners were rendered under the provisions of the earlier enactments like Tamil Nadu General Sales Tax Act, KGST Act and Central Sales Tax Act. In view of the provisions contained in the KVAT Act, providing for input tax credit, the decisions under the earlier enactments can have no application, while interpreting the provisions of the said Act, it is submitted. In support of his submissions, the learned Special Government Pleader relied on the decisions in Ambica Mills Ltd. v. State of Gujarat [1964] 15 STC 367 (Guj) and India Pistons Limited v. State of Tamil Nadu [1974] 33 STC 472 (Mad) and also a few other decisions. The short point that arises in these writ petitions, is whether the cash discount given through credit notes, subsequent to the date of sale, but within the return/assessment period, should be deducted from the turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice, for the reason that the same was given subsequent to the sale, is ultra vires of the provisions of the Constitution, cannot be accepted. It is well-settled law that every legislative entry is only a field of legislation and the Legislature, subject to the limitations in the Constitution, has got plenary powers to legislate under the relevant field. So, if the State Legislature provides that cash discount will be excluded from the sale price, if only it is shown in the tax invoice, the same is perfectly within jurisdiction and intra vires. The contention of the petitioners that the same runs counter to the concept of sale and sale price, as explained by the courts, cannot be accepted. The courts can say only, what is the law or what was the law. But, the Legislature can say, what should be the law. The said power has been invoked in this case. Under our Republican Constitution, the people, through their delegates in the Legislature, decide what are the laws which should govern them. The courts, which are answerable only to Law and God under our constitutional scheme, have only the power to interpret the law. If the courts are to make law and claim that the same will bind the L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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