TaxTMI 
TaxTMI 
2015 (5) TMI 462
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....ontained in the Delhi Sales Tax Act, 1975, which was in vogue during the relevant periods prior to its repeal in terms of Section 106 of DVAT Act w.e.f. 01.04.2005. It may be added here that notwithstanding the said repeal, the remedies available under the Delhi Sales Tax Act, 1975 continue to be available in terms of the savings clause also contained in Section 106 of DVAT, albeit through the machinery created by the new law. 2. While issuing notice on these appeals, the questions of law raised were noted in the common order passed on 06.01.2015. On the basis of hearing held on 14.01.2015, while admitting these appeals, the following questions of law were formulated for consideration:- "1. 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? 2. 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?" 3. The Sales Tax Appeal No. 1/2015 relates to AYs 1992-93, 1993-94 and 1999-2000. The appeal arises out of the judgment of the Tribunal rendered on....
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....y for re-consideration in light of cancellation of bills claimed by RD Sales, goods returned or claim on account of defective goods, etc. 7. The claims for deduction on account of "turnover discount" for AYs 1994-95 to 2004-05 were similarly rejected by the assessing officer by orders dated 17.09.1998, 01.11.1999, 29.02.2000, 26.09.2000, 22.01.2001, 31.12.2001, 30.09.2002, 13.03.2003, 22.03.2004, 10.02.2005 and 29.03.2006 respectively. The assessment order for AY 1994-95 was set aside by the first appellate authority by order dated 17.06.1999 and the matter remanded to the assessing officer with direction to pass a speaking order on whether the turnover discount could be allowed. The assessing authority passed a fresh order for that period on 13.01.2003 again rejecting the claim of such deduction, for the reason the dealer had not given discount to his customer. The order dated 13.01.2003 was challenged before the Commissioner by appeal which, to the extent of claim, was rejected by order dated 29.02.2004. Similarly, appeals in respect of the AY 1995-96, 1996-97, 1997-98, 1998-99, 2000-01, 2001-02, 2002-03, 2003-04 and 2004-05 were rejected by the appellate authorities by orders....
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....pect of cash discount and not any other form of discount. Since the appellant has not given any cash discount, the discounts given by the appellant to its dealers is not entitled for deduction from the sale price. ..." 12. The Tribunal upheld the arguments of the Revenue and rejected the claim of the assessee for deduction mainly observing thus: "8. ...Deduction is allowable only in respect of cash discount. In the instant case, it cannot be said that the discount was given in cash. On the contrary, it was to be credited to the account of the dealer on quarterly basis. It will be relevant to refer to the observations of Their Lordships in the case of M/s Indian Pistons Limited Vs. State of Tamil Nadu [(1974) 33 STC 472 (Mad)] wherein ...held as under:- "It is well-known that a scheme of discount adopted by the commercial circles is normally of two types - cash discount and trade discount - and a discount normally denotes a deduction from the amount due as price of goods in consideration of its being paid promptly or in advance. Trade discount is the one allowed to a customer if he places an order for a certain amount or quantity or more. Such a discount is given to encoura....
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....ually allowed by a manufacturer or wholesale dealer with an object of improving its own prospects in the business. The appellant argues that when goods are marketed through reputed companies, firms and other individual dealers, the demand for such goods increases and correspondingly the business of the manufacturer or the wholesaler would prosper and its capacity to withstand also improves. Therefore, any concession in price shown in such circumstances by way of an additional incentive with a view to promote one's own business, qualifies for deduction as a discount. 15. It is argued that the VAT Tribunal erred in relying on India Pistons Ltd. vs State of Tamil Nadu (1974) 33 STC 472 (Mad.) while disallowing the deduction of turnover discount from the assessee's turnover since the facts of the present case are distinguishable from that one inasmuch as the benefit of bonus discount there had accrued to the assessee at the end of every year on achieving a pre-sale target. As a result, the credit so obtained by the assessee under bonus scheme could be used only for future transactions and the same would not vary the sale price of the product. In the present case, on the other hand, ....
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....able quantum is "liable to pay tax" under the said law "on all sales effected by him". The Sales Tax is levied at the rates specified in Section 4. The expression "turnover" is explained in Section 2 (o) as under:- "(o) "turnover" means the aggregate of the amount of sale price receivable, or if a dealer so elects, actually received by a dealer in respect of any sale of property in goods, made during any prescribed period in any year after deducting the amount of sale price, if any, refunded by the dealer to a purchaser in respect of any goods purchased and returned by the purchaser within the prescribed period; PROVIDED that an election as aforesaid once made shall not be altered except with the permission of the Commissioner and on such terms and conditions, as he may think fit to impose." (emphasis supplied) 19. Thus, the turnover in which respect the dealer owes collection and payment of sales tax to the revenue is the sum total of the sale price received, or receivable, during the financial year. Naturally, amount if any refunded would stand excluded. 20. For appreciating as to what goes into the making of "turnover", it is essential to understand the expression....
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....he retailers, one concerning the sale of goods at the catalogue price and the second according the benefit of trade discount. 23. Against the above backdrop, the Supreme Court explained the concepts of "cash discount" and "trade discount" as under:- "5 ...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 sa....
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....tract between the parties." 27. The case reported as Govt. of India v. Madras Rubber Factory Ltd. (1995) 4 SCC 349 concerned Central Excise and Salt Act, 1944, Section 4 whereof prescribes the mode of valuation of excisable goods for purposes of charging of duty of excise. Section 4(4)(d)(ii), as it stood at the relevant point of time, defined the expression "value", in valuation of excisable goods, making allowance, inter alia, for "trade discount" to be factored "in accordance with the normal practice of the wholesale trade". In the context of the said fiscal statute, the assessee had claimed that it was granting discount to all its dealers operating under Recurring Credit Scheme (RCS), the benefit being accorded on half-yearly basis depending on the volume of purchases made by each such dealer. The assessee explained that the discount was granted by issuing "credit notes" to the dealers. The discount could not be shown in the invoice for the reason its value would be known only at the end of the half year. The objective of the scheme was to encourage the turnover of the sales. It had been found by the assessing officer that in the ultimate analysis, the dealer would pay the c....
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.... in the invoice price at the time of sale, quoting the view taken in the case of Union of India v. Bombay Tyres International (P) Ltd. (2005) 3 SCC 787 as under:- "25. In Union of India v. Bombay Tyres International (P) Ltd., in a very brief order this Court very succinctly described "trade discount" and held it to be deductible from the sale: "(1) Trade discounts.-Discounts allowed in the trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such trade discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price." (emphasis supplied) 31. A similar view taken by Andhra Pradesh High Court in the case reported as Godavari Fertilisers and Chemicals Ltd. v. Commissioner of Commercial Taxes (2004) 138 STC 133 (AP) to the effect that "...a discount given by means of credit notes issued subsequent to the sale is as much a trade discount admis....
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....nt granted to its dealers and rightly so declared in the returns. The assessing authorities have unjustly denied the benefit of deduction on such account. The first question of law, noted in para 2 noted above is, therefore, answered in the affirmative in favour of the assessee. On inter-State sale: 36. We may now turn to the second question. 37. The background facts, and contentions, relevant for this part of the dispute (relating to AY 1992-93) were noted by the Tribunal in its order dated 30.07.2014 as under:- "7. ... Rs.21,63,005/- from the Returns during the year 1992-93 ...was excluded on the ground that these sales made to M/s Tyre Junction, Badarpur, Delhi had been taxed by Excise & Taxation Officer, Faridabad. Ld. Counsel for the appellant submitted that stocks related to these sales were transferred from Faridabad, but delivery of this stock was made en-route to M/s Tyre Junction at its shop at Badarpur border. The transfer of stock was recorded in the stock register of Delhi office, but sale was shown to the said dealer. There was also complete tally of stock transferred from Faridabad and sold to Tyre Junction. Further submissions made that when the goods mo....
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....e were prior orders and mutual understanding with the Company for the said supplies. When the goods are to move in pursuance to a contract outside the state, the place of delivery in either State is not relevant and the transaction is an inter-state sale and not a branch transfer. 42. In above context, Section 3 of the Central Sales Tax Act, 1956 needs to be taken note of. It reads as under:- "3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce. "A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1.-Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2.-Where the movement of goods commences and terminates in the same State it ....
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....ch movement is the result of a covenant in the contract of sale or is an incident of that contract." 46. The court followed its earlier decision in Oil India Ltd. v. The Superintendent of Taxes (1975) 1 SCC 733, where it was held that:- "...(1) a sale which occasions movement of goods from one State to another is a sale in the course of inter-State trade, no matter in which State the property in the goods passes; (2) it is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement; and (3) it is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It would be enough if the movement was in pursuance of and incidental to the contract of sale (page 801, SCC p. 737, para 9)." 47. Similar questions also arose in Sahney Steel and Press Works Limited and Another v. Commercial Tax Officer and Others (1985) 4 SCC 173, again in the context of Section 3(a) of the Central Sales Tax Act, 1956. The assessee in that case had its registered office and factory at Hyde....
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....on 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". 49. In the case at hand, there is a clear finding of fact recorded, and noticed by the Tribunal in the impugned order, that the goods in question were transferred from the office of the appellant in Faridabad to its office in Delhi against "form F" and duly entered accordingly in the stock registers. It may be that the goods were eventually sold to M/s Tyre Junction, a dealer operating from Badarpur (Delhi). But there is no material furnished by the assessee to show that such movement of the goods from Faridabad (Haryana) to its Delhi office was for purposes of, or pursuant to the eventual sale of such goods to M/s Tyre Junction in Delhi. 50. The assessee made a claim about inter-State sales in respect of the above-mentioned goods before the assessing authority at Faridabad. The scrutiny by the assessing authority at Faridabad of such claim, inter alia, on the basis of inquiry made from M/s Tyre Junction, however, cannot bind the assessing authorities in Delhi. It appears that the assessing authority in Haryana failed to take note of....