TMI Blog2003 (9) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany having its head office at Mumbai and branches at different places including Patna. It is engaged in manufacturing and sale of medicines. It is registered under the Act and is paying sales tax. In the past, it claimed quantitative discount as trade discount and that had been allowed with respect to the previous assessment years, but for the assessment year in question, i.e., 2001-2002 the respondent-authority disallowed the aforesaid quantitative discount and included the same in taxable turnover. 4.. According to the petitioner, as per its scheme, it is allowing free quantitative discount to its customer according to normal trade practice and neither in the past the aforesaid amount was added in the taxable turnover in the State of Bihar nor has the said amount been added in the taxable turnover in other States, namely, Uttar Pradesh, Orissa, Assam and West Bengal, where it is carrying on business. Such type of discount is also claimed by other manufacturers of medicines and that is being allowed as trade discount. The copies of the scheme containing the aforesaid quantitative discount have been annexed as annexures 5 series to the writ petition. According to the said sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed along with other taxable turnover. 7.. Dr. Devi Pal, learned Senior Counsel appearing for the petitioner raised two points. Firstly, he submitted that according to the scheme of trade discount or quantitative discount, on purchase of certain types of medicines up to a particular quantity, the petitioner gave certain quantities of strips and vials free to the purchasers without charging any consideration and as such the medicines, which were supplied free in terms of the aforesaid scheme are not covered by the definition of the sale as defined under the Act because no consideration money has passed. In support of the first submission, he relied upon two decisions of the Supreme Court in Commissioner of Income-tax, Andhra Pradesh v. Motor General Stores (P.) Ltd. reported in [1967] 66 ITR 692 (SC); AIR 1968 SC 200 and Indian Steel Wire Products Ltd. v. State of Madras, reported in [1968] 21 STC 138 (SC); AIR 1968 SC 478. Secondly, he submitted that the petitioner has given the trade quantitative discount, which is in the nature of trade discount, given according to ordinary trade practice and as such the same is to be deducted. The said discount cannot be included in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k whether or not intoxicating; and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply, and all grammatical variations and cognate expressions shall be construed accordingly; and 'purchase' means such acquisition of property in goods or purchase of those goods by the person to whom such transfer, delivery or supply is made." 10.. The said provision was amended in 1984 and the definition of sale was enlarged in view of the definition of "tax on the sale or purchase of goods", inserted as clause (29A) of article 366 of the Constitution of India by the Forty-sixth Amendment. According to the said provision, the sale means any transfer of property in goods for cash or deferred payment or other valuable consideration. The sale price has been defined under section 2(u) of the Act, which runs as follows: "2(u) 'sale price' means the amount payable to a dealer as valuable consideration in respect of the sale or supply of goods; Explanation I.-Sale price shall include any amount charged by the dealer for anything done in respect of the goods at the time of, or before delivery thereof to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bench of the Supreme Court in the case of Indian Steel Wire Products Ltd. v. State of Madras [1968] 21 STC 138 (SC); AIR 1968 SC 478, also reiterated the same view and held that to constitute a valid sale, there should be four elements, namely, (i) parties competent to contract, (ii) mutual assent, (iii) the property must pass in the goods from the seller to the buyer, and (iv) a price in money paid or promised. 14.. In the case of Commissioner of Income-tax v. Motors General Stores (P.) Ltd. [1967] 66 ITR 692; AIR 1968 SC 200, the apex Court, while considering the question as to the meaning of sale held that the presence of money consideration is an essential element in a transaction of sale. If the consideration is not money but some other valuable consideration, it may be an exchange or barter but not a sale. 15.. Thus, before any transaction can be termed as sale, the aforesaid four conditions have to be fulfilled. In the present case, the admitted fact is that under the discount scheme, some free medicines were supplied by the petitioner to the distributors or stockists for which no consideration money was paid by them. It is not the case of the department that any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her authorities of the department and the High Court also upheld the claim of the assessee. Thereafter, the matter went before the apex Court. That was a case under the Central Sales Tax Act, but the definition of the sale price under section 2(h) of the said Act is the same as the definition given under the Act. The apex Court held that though only cash discount is provided under the definition of the sale price, but a trade discount is also to be deducted from the sale price. Cash discount is allowed by wholesalers to retailers on expeditious payment. Trade discount is a deduction from catalogue price given by the wholesaler to retailer so that he may sell the goods at catalogue price and make a reasonable margin of profit after taking into account his business expenses. In a case where trade discount is allowed, the sale price is an amount determined after deduction of the trade discount. The law laid down by the apex Court is as follows: "At the outset, it is appropriate that we set forth the two relevant definitions contained in the Central Sales Tax Act. Section 2(j) defines 'turnover' to mean 'the aggregate of the sale prices received and receivable by him (the dealer) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 983] 53 STC 48. That was a case under the provisions of the Kerala General Sales Tax Act. The assessee was a dealer in diesel fuel injection parts, etc. Service discount was given by the assessee as the additional trade discount to the main distributors over and above the normal trade discount in consideration of the extra benefit derived by the assessee by reason of marketing of its goods through them. Dealing with the said matter, the apex Court held that the service discount was a trade discount and the same is to be deducted from the total turnover provided they are supported by entries in the accounts of the assessee. It was observed that "ordinarily any concession shown in the price of goods for any commercial reason would be a trade discount which can legitimately be claimed as a deduction under clause (a) of rule 9 of the Rules. Such a concession is usually allowed by a manufacturer or a wholesale dealer in favour of another dealer with the object of improving prospects of his own business. It is common experience that when goods are marketed through reputed companies, firms or other individual dealers the demand for such goods increases and correspondingly the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sale of the articles would only be the net amount after adjustment of the discount. Thus, the said case also supports the stand of the petitioner. 23.. The stand of the petitioner that in ordinary trade practice, it is claiming the said discount finds support from the fact that in the previous assessment orders, the department has allowed the aforesaid discounts and has not included the aforesaid amount in the taxable turnover. The petitioner's case is that such discount has been allowed in case of other manufacturers but the said benefit has been denied to the petitioner. 24.. The quantitative discount formed integral part of the agreement between the parties affecting the price and, thus, the price of the said quantitative discount will qualify for the deduction. There is another reason also to come to the aforesaid conclusion. If the total quantity including the quantity given free in terms of the scheme is treated as sale, in that case on payment of price for lesser quantity (vials and strips), more quantity is being supplied and, thus, the aforesaid price includes the price of the medicines supplied free and as such the price of the medicines supplied free cannot be ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
