Quality allowance credit note may reduce taxable turnover where the parties revise the sale price after inspection and complaint.

A credit note issued as a quality allowance can reduce taxable turnover where the parties, after complaint and inspection, effectively revise the sale price by subsequent dealing and correspondence. The goods were originally priced at Rs. 65 per kg., but the seller accepted the quality issue and the ultimate price realised was Rs. 51 per kg. On that basis, the adjustment was treated as a substituted sale price rather than a post-sale concession, so only the real consideration formed part of turnover under the Central Sales Tax Act, read with the Sale of Goods Act. The disputed amount was therefore excluded from taxable turnover.

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Issues: Whether the credit note issued towards quality allowance could be excluded from the taxable turnover on the ground that the original price contract stood rescinded and the sale price was subsequently revised.

Analysis: The goods were sold under an agreement fixing the price at Rs. 65 per kg., but after complaint regarding quality, inspection was made and the seller accepted that the goods did not meet the expected quality. The seller thereafter granted a quality allowance through a credit note, with the result that the ultimate price realised for the goods was Rs. 51 per kg. On these facts, the price was not merely reduced by a post-sale concession unrelated to the bargain; rather, the parties, by subsequent course of dealing and correspondence, revised the price payable for the goods. Under section 2(h) of the Central Sales Tax Act, 1956, sale price is the consideration for the sale, and section 2(j) brings into turnover only the aggregate of such sale prices. Read with section 9(1) of the Sale of Goods Act, 1930, the price may be fixed by contract or determined by the course of dealing between the parties. The adjustment in this case reflected a substituted price and not a separate amount liable to be added to turnover. The reasoning in the cited authorities also supported the view that the real sale price was the reduced amount actually agreed and received.

Conclusion: The disputed amount was not includible in the taxable turnover, and the assessee succeeded.

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