TMI Blog1990 (4) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... in yarn. In the course of their business dealings, they entered into an agreement on 16th April, 1977, with Messrs. Anglo-French Textiles Limited, Pondicherry (hereinafter called "the customer"). Under the agreement, the customer had agreed to buy polyester/cotton 67/33 blended yam on cones free from manufacturing defects at Rs. 65 per kg. Pursuant to that, goods were sent by the petitioners to the customer. After receiving the goods, the customer complained about the quality of the blended yarn supplied and as a result of which, the petitioners arranged for the inspection of the yam and all the cloths processed out of that blended yarn. After inspection, the petitioners agreed by their letter dated 26th September, 1977, that the quality o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale price" and "turnover" in the Central Act as well as to sections 9, 15, 16 and 41 of the Sale of Goods Act, 1930. Based on the above materials, learned counsel submitted that the petitioners are entitled to the relief sought either on the ground that the original contract regarding the price per kg. on the blended yam had been rescinded and a new contract had come into effect or alternatively on the basis that the amount representing the credit note cannot be included in the taxable turnover having regard to the definition of "sale price" and "turnover" in the Central Act. He also submitted that the observations of the Supreme Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Advani Oerlikon (P.) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions as to quality or fitness" respectively. Section 41 of the Sale of Goods Act deals with "buyer's right of examining the goods" It is not in dispute that the contract between the parties was to the effect that the blended yarn must be free from manufacturing defects and the price for such blended yam will be at Rs. 65 per kg. It is again not in dispute that on the complaint of the customer, the petitioners arranged for an inspection of the goods supplied by them and thereafter conceded the complaint made by the customer regarding minor shortfall in the quality, as a result of which, the petitioners agreed to give credit in a sum of Rs. 14 per kg. That means, though the original price for the blended yam supplied was Rs. 65 per kg., the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce which enters into the computation of the turnover is the consideration for which the goods are sold by the assessee. In a case where trade discount is allowed on the catalogue price, the sale price is the amount determined after deducting the trade discount. The trade discount does not enter into the composition of the sale price, but exists apart from and outside it and prior to it. It is immaterial that the definition of 'sale price' in section 2(h) of the Act does not expressly provide for the deduction of trade discount from the sale price. Indeed, having regard to the circumstance that the sale price is arrived at after deducting the trade discount, no question arises of deducting from the sale price any sum by way of trade discount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Sales Tax), we are not inclined to apply the principle in that case to the case on hand where, admittedly, no cash payment is made, but only a credit note is given to the distributor and they are enabled to purchase goods from the assessee for the said amount in the subsequent year. We are not, therefore, in a position to treat the issue of credit notes with the condition that they can be utilised for purchase of the goods in future, as cash payments." After inviting our attention to the above passage, learned counsel Mr. Natarajan, submitted that in the case on hand, the credit note was not with any condition and it represented "cash payment". The only ground on which the deduction was disallowed by the authorities was, according t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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