1994 (11) TMI 418 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the transport rebate claimed by the assessee was allowable as a deduction under section 5(2)(A)(a)(iii) of the Orissa Sales Tax Act, 1947.
2. Whether the transport rebate can be considered as part of the "sale price" and "turnover of sales" under sections 2(h) and 2(i) of the Orissa Sales Tax Act, 1947.

Detailed Analysis:

1. Allowability of Transport Rebate as Deduction:
The Tribunal initially dismissed the assessee's application for reference to the High Court, leading the assessee to file a reference application under section 24(2) of the Orissa Sales Tax Act. The High Court directed the Tribunal to refer the question of whether the transport rebate claimed by the assessee was allowable as a deduction under section 5(2)(A)(a)(iii) of the Orissa Sales Tax Act, 1947, since it constituted part of the sale price.

The assessee-dealer, engaged in the business of asbestos and cement products, deducted a sum towards transport rebate from the sale price during the year 1979-80. The assessing officer questioned the permissibility of this deduction under the law. The Deputy Chief Accounts Officer for the company cited a Supreme Court decision in a similar case involving the dealer, where it was held that tax could not be levied on the freight as it was not part of the sale price.

However, the assessing officer found discrepancies between the facts of the cited case and the present one, particularly noting alterations in the stockistship agreement clauses. The assessing officer concluded that the transport rebate allowed was not the cost of freight actually incurred by the customers and thus was not permissible under the Orissa Sales Tax Act. Consequently, the transport rebate was added to the dealer's taxable turnover, leading to an extra tax demand.

2. Transport Rebate as Part of "Sale Price" and "Turnover of Sales":
The dealer appealed the assessment order, but the Assistant Commissioner of Sales Tax upheld the assessing officer's findings, stating that the transport rebate was neither freight nor a discount and thus not deductible from the sale price. The Tribunal also confirmed these findings in the second appeal.

The High Court reframed the question to consider whether the transport rebate allowed by the applicant-company to the stockist could be held as "sale price" and "turnover of sales" under sections 2(h) and 2(i) of the Orissa Sales Tax Act, 1947, for tax levy purposes.

The court examined the definitions under section 2 of the Orissa Sales Tax Act:
- Section 2(h) defines "sale price" as the amount payable to a dealer as consideration for the sale or supply of goods, less any sum allowed as cash discount according to ordinary trade practice, but including any sum charged for anything done by the dealer in respect of the goods at the time of, or before delivery thereof.
- Section 2(i) defines "turnover of sales" as the aggregate of the amounts of sale prices and tax, if any, received and receivable by a dealer in respect of sale or supply of goods during a given period.

The court noted that the transportation charges were not separately charged but were paid by the purchaser. The dealer argued that the transport rebate, calculated based on distance and quantity sold, was mutually agreed upon and thus should be considered a reduction in the sale price. The court found that the rebate was covered by the term "any other sum mutually agreed upon" in clause 19 of the stockistship agreement.

The court also reviewed several legal precedents and definitions of "trade discount," concluding that the transport rebate, though not deducted initially, resulted in a net price received by the dealer, which was the catalogue price less the deductions permitted. The court held that such deductions were covered within the definitions of sections 2(h) and 2(i) of the Orissa Sales Tax Act, 1947.

Conclusion:
The court answered the reframed question of law in favor of the assessee, stating that the transport rebate allowed by the applicant-company to the stockist could be considered as part of the "sale price" and "turnover of sales" under the Orissa Sales Tax Act, 1947, for tax levy purposes. The reference was disposed of accordingly.

Reference answered accordingly.