Trade discount and credit notes excluded from taxable turnover when backed by agreement, trade practice and proper accounts.

Trade discount and credit notes granted to dealers were treated as deductions from taxable turnover where they were supported by agreement or established trade practice and were reflected in the dealer's accounts. The Court applied settled sales tax principles that such discounts do not form part of the sale price when properly documented, so the revised assessments and appellate orders disallowing the deductions could not stand. On that basis, the writ petitions succeeded, the adverse tax demands based on disallowance of trade discount were set aside, and refund of amounts paid was directed.

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Issues: Whether trade discounts and credit notes issued to dealers were allowable deductions while computing taxable turnover, and whether the suo motu revision and appellate orders disallowing such deductions were liable to be quashed.

Analysis: The writ petitions turned on whether the reductions claimed by way of trade discount and credit notes formed part of the sale price or were deductible from turnover under the settled principles governing sales tax assessments. The Court found that the issue was squarely covered by the authorities cited, which recognised that a trade discount, when granted under agreement or regular trade practice and duly reflected in the accounts, does not enter into the sale price and is allowable as a deduction. On that basis, the orders revising the assessments and upholding the revisions could not be sustained.

Conclusion: The trade discounts and credit notes were held to be allowable deductions, and the impugned revision and appellate orders were quashed in favour of the assessee.

Final Conclusion: The writ petitions succeeded, the adverse tax demands based on disallowance of trade discount were set aside, and refund of the amounts paid was directed.

Ratio Decidendi: Trade discount, when supported by agreement or established trade practice and borne out by the dealer's accounts, is not part of the sale price and must be excluded from taxable turnover.

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