2018 (2) TMI 314

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.... 2 On 29 May 2010, the Deputy Commissioner of Commercial Taxes, Bengaluru disallowed the quantity discount accorded by the appellant to its distributors on the ground that the discount was not relatable to the sales effected by the relevant tax invoices. The assessing authority held that the quantity discount offered by the appellant could not be allowed under Rule 3(2)(c) of the Karnataka Value Added Tax Rules 2005 ('the Rules'). The period in question was 1 April 2006 to 31 March 2007, 1 April 2007 to 31 March 2008 and 1 April 2008 to 31 March 2009. 3 On appeal, the Joint Commissioner of Commercial Taxes (Appeals - 1), Bengaluru set aside the order of the assessing authority, holding that the quarterly scheme discount given by the appellant was an allowable deduction since the appellant had realized the consideration from the purchaser towards the sale of goods after deducting the amount of discount and, VAT was charged only on the net amount shown in the tax invoice after allowing the benefit of discount. 4 The order of the first appellate authority dated 12 October 2010 was revised under Section 64 (1) of the Act by the Additional Commissioner on the ground that the quart....

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....cted, from the invoice price (Union of India v Bombay Tyre International Ltd (2005) 3 SCC 787). Moreover, periodical discounts such as half yearly discounts cannot, by their very nature, be shown on the face of each invoice as the discount is known only at the end of the relevant period. Since the discount is known and understood at the time of the removal of goods, though quantified later, it was held to be eligible for deduction as held in Government of India v Madras Rubber Factory Ltd (1995) 4 SCC 349. In sum and substance, the case of the appellant is that the sale price received by it is the net amount exclusive of discount. It is understood at the time of the sale itself that the customer would be entitled to a discount, the quantum being computed at the end of the quarter. Hence, the real sale price charged by the appellant for parting with the goods is the net amount exclusive of discount and hence the trade discount given by the appellant cannot form a part of the sales turnover. Finally, it has been urged that a literal construction of Rule 3 (2)(c) would render it unworkable and practically impossible to implement. 7 On the other hand, it has been urged on behalf of ....

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....n by way of sale, and subject to such conditions and restrictions as may be prescribed the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof. Explanation: The value of the goods transferred or despatched outside the State otherwise than by way of sale, shall be the amount for which the goods are ordinarily sold by the dealer or the prevailing market price of such goods where the dealer does not ordinarily sell the goods." The expression 'taxable turnover' is defined in Section 2(34) as follows: "2(34) 'Taxable turnover' means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed, but shall not include the turnover of purchase or sale in the course of interstate trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India and the value of goods transferred or despatched outside the State otherwise than by way of sale." The above definition....

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....porary competitive market, trade discounts not only are dependent on variable factors but also might be strategically not disclosable at the time of the original sale/purchase so as to be coevally reflected in the tax invoice or the bill of sale, as the case may be. The actual quantification of the trade discount, depending on the nature of the trade and the related stipulations in any contract with regard thereto, may be deferred till the happening of a contemplated event, so much so that the benefit thereof is extended at a point of time subsequent to that of the original sale/purchase. That by itself, subject to proof of such regular trade practice and the contract/agreement entered into between the parties, would not render the trade discount otherwise legal and acceptable, either non est or fictitious for evading tax liability. In the above factual premise, the interpretation as sought to be provided by the Revenue would evidently reduce Section 3(2)(c) to a dead letter, ineffective and unworkable and would defeat the objective of permitting deductions from the total turnover on account of trade discount." (Id at page 485) (emphasis supplied) Relying on the earlier....