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TMI Blog2014 (6) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the petitioner would be the price fixed by the petitioner after deduction in primary invoice on the basis of credit notes issued subsequently because that was the price, which was released by the petitioner effectively and fixed under the price fixation mechanism. The authority committed an error of law in disallowing the deductions from total turnover on the basis of credit notes issued to Oil Marketing Companies which had resulted reduction in the turn over and liability of tax of the petitioner. - Decided in favour of assessee. - W.P.No.4718/2011 - - - Dated:- 7-3-2014 - Shri S. K. Gangele and Shri D. K. Paliwal, JJ. For the Petitioner : Shri G.N. Purohit, Senior Advocate with Mr. Prashant Sharma, Advocate For the Respondent : Mr. M.P.S.Raghuvanshi, Additional Advocate General ORDER Per Justice Gangele J. The petitioner has filed this petition against the orders dt.25.5.2011 (Annexure P/1) and dt.25.5.2011 (Annexure P/2). By the aforesaid orders, the authority imposed tax liability of Rs.16,04,66,104/- against the petitioner. 2. The question for consideration before the court is that what is the sale price in accordance with the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l price on quarterly basis and the price discount used to be made on quarterly basis. Under the aforesaid scheme, credit or debit notes were issued by the petitioner in favour of Oil Manufacturing Companies. The petitioner accordingly revised its liability of tax reducing the turn over as per the final price. After fixing the price in accordance with credit or debit note, the petitioner used to fix its tax liability calculating the operative price in respect of VAT Tax as well as Central Sales Tax. 7. Under the scheme, the petitioner is not at all at liberty to fix the price. The Petroleum Ministry and other agencies fix the price of the gas. The petitioner used to get information about the price at the end of quarter after taking into consideration foreign crude price. The company at the time of supply of LPG to the oil companies issue provisional invoice and after receiving information about quarterly price, the company issue final bill or invoice by issuing credit or debit note in accordance with fluctuation in price as per the directives of PPAC. The directions issued by the PPAC in this regard are binding on the petitioner seller as well as the purchasers. The taxing author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for sale of drugs and medicines specified in entry 10 of part III of Schedule II shall be the maximum retail price printed on the package containing the drugs and medicines, for the purposes of levy of tax under section 9.' 10. In accordance with the aforesaid provisions, the sale price means the amount or any other consideration payable to a dealer as valuable consideration for the sale of any goods less any sum allowed as discount according to ordinary trade practice. In the aforesaid section, it has also been mentioned that the discount at the time of sale shall be excluded from the sale price which must be evident from the invoice. 11. The taxing authority did not consider the pricing mechanism of LPG. It has simply considered the fact that in accordance with the definition of Section 2 (v) of the VAT Act, the sale price means a consideration payable to a dealer as valuable consideration for the sale of any goods. Because the petitioner issued provisional bills at the time of sale of LPG to Oil Marketing Companies, hence, the sale price would be the price which was fixed by the petitioner in provisional bills and the petitioner is liable to pay tax accordingly. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to the stockists as discount at the end of the year, on making out of the accounts to the normal trade practice, was a permissible deduction from the turnover of the assessee. 14. Same principle has been laid down by the High Court of Karnataka in Belgaum Structural Engg. (P.) Ltd. v. Addl. CCT [1998] 111 STC 222 where the court has held as under : A close look at the definition reproduced above would reveal that trade discount allowed by the dealer does not represent the price of the goods sold. Under rule 6 (1)(b) the total amount paid or payable to the dealer as the consideration for the sale is to be taken as the taxable turnover. A combined reading of the definition of taxable turnover with rule 6 (1)(b) leaves no manner of doubt that whatever prices were received by the dealer for the sale of goods would go towards the taxable turnover and the trade discount/cash discount given by the dealer to the purchasing dealer and not received by him, shall not be includable in the taxable turnover. The revisional authority was not justified in including the trade discount amount as the turnover for the purpose of section 6 (1)(b) of the Act. Nothing can be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practice normally prevailing in the trade... . It is true that a deduction on account of cash discount is alone specifically contemplated from the sale consideration in the definition of sale price by Section 2 (h), and there is no doubt that cash discount cannot be confused with trade discount. The two concepts are wholly distinct and separate. Cash discount is allowed when the purchaser makes payment promptly or within the period of credit allowed. It is a discount granted in consideration of expeditious payment. A trade discount is a deduction from the catalogue price of goods allowed by wholesalers to retailers engaged in the trade. The allowance enables the retailer to sell the goods at the catalogue price and yet make a reasonable margin of profit after taking into account his business expense. The outward invoice sent by a wholesale dealer to a retailer shows the catalogue price and against that a deduction of the trade discount is shown. The net amount is the sale price, and it is that net amount which is entered in the books of the respective parties as the amount reliable. Orient paper Mills Ltd. v. State of Orissa, [1975] 35 STC 84 : 1974 Tax LR 2224 (Ori. HC). 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h had resulted reduction in the turn over and liability of tax of the petitioner. 17. The respondents have also raised a preliminary objection regard to maintainability of writ petition in view of alternative remedy in accordance with Section 46 of VAT Act and also in accordance with provisions of Central Sales Tax Act. 18. The question involved in this writ petition is in regard to interpretation of sale price in accordance with the provisions of VAT ACT and Central Sales Tax Act. 19. Hon'ble Supreme Court in Filterco v. C.S.T. [1986] 2 SCC 103 considered the same situation and held as under : 11. We are of opinion that the High Court should have examined the merits of the case instead of dismissing the writ petition in limine in the manner it has done. The order passed by the Commissioner of Sales Tax was clearly binding on the assessing authority under Section 42-B(2) and although technically it would have been open to the appellants to urge their contentions before the appellate authority namely, the Appellate Assistant Commissioner, that would be a mere exercise in futility when a superior officer namely, the Commissioner, has already passed a we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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