STR/70/2012 of M/S DOLLAR INDUSTRIES LTD Vs C T O JAIPUR on 22 December 2016

JUDGMENT---------

1. Since these petitions involve common facts inbetween the parties for different assessmentyears, therefore, are being decided by this commonorder for the sake of convenience. Assessmentyears are 2006-07, 2007-08, 2008-09 & 2009-10respectively.

2. The brief facts noticed for disposal of thepresent petitions are that the petitioner is amanufacturer and whole sale dealer of Hosierygoods in the State of Rajasthan and it is claimedthat the assessee is maintaining proper books ofaccounts and returns were duly filed under theRajasthan Value Added Tax Act (for short 'the RVATAct') and accounts are also audited. A survey wasconducted at the business premises of thepetitioner and it was noticed by the officer thatthe goods on stock transfer is being imported fromoutside the State and mainly from Kolkata and isbeing sold locally in the State of Rajasthan andthe Assessee was paying VAT @ 4%, it was alsonoticed by the Assessing Officer that the assesseegrants “Item discount” as well as “Specialdiscount” @ 2% and the same was being reduced fromthe bill and after reducing the aforesaid twodiscounts, the VAT was paid @ 4%. It was furthernoticed that another “Cash discount” was allowedby the assessee that was subjective that if the sale price was deposited by the purchasers withinthe given time frame, additional 3% discount wasalso granted which too was reduced by theassessee. The Assessing Officer was of the viewthat in so far as the “Item and Special discounts”are concerned, they were in order but in so far asthe “Cash discount” is concerned, it was Ex-postfacto grant of discount/incentive which could notbe excluded and was of the view that VAT isrequired to be charged excluding the cash discountand accordingly show cause notice was given. Replywas filed to the show cause notice contending thatthis is also a part of the bill and is not in thenature of Ex-post facto grant of discount, and ifthe purchasers pay the said amount within duedate, it being part of the bill, VAT could nothave been charged on the said amount, however, theAssessing Officer was not satisfied with theexplanation furnished, imposed tax without grantof cash discount so also charged interest as wellas levied penalty u/Sec.61.

3. The matter was assailed before the Dy.Commissioner (A) who also upheld the findingrecorded by the Assessing Officer.

4. The matter was further assailed before the TaxBoard who also being satisfied with the findingsrecorded by the two authorities, upheld thefinding of the Assessing officer that it is Ex-

post facto grant of discount and the same is notrequired to be reduced. However, insofar as thepenalty u/Sec.61 of the Act is concerned, the samewas directed to be deleted.

5. Counsel for the petitioner relying on thedefinition of section 2(36) of the VAT Act inparticular the Explanation, contended that anycash or trade discount at the time of sale isallowable and this having been shown in the billsitself if purchasers had paid the same within thedue date prescribed in the bill, additional cashdiscount is also to be allowed which cannot besaid to be Ex-post facto grant of discount whenthe sale was conditional. Counsel also contendedthat it was known from the bill itself that it isto be allowed in case purchaser pays the samewithin the given period and thus, the findingrecorded by all the three authorities, is not justand proper and is required to be interfered with.Counsel also contended that the Assessing Officerhas not been able to prove by any iota of evidencethat it was Ex-post facto grant of discount andmerely because it happened later is no reason tocome to the conclusion reached by the lowerauthorities and contended that substantialquestion of law arise. Counsel also relied uponjudgments of the Apex Court in the case of Stateof Rajasthan and Another Vs. Rajasthan ChemistsAssn. (2006) 6 SCC 773 & Fenoplast Vs. State of A.P. and Others (1998) 8 SCC 185 and Dr.Shankarananda Guha Vs. Additional Commissioner,Commercial Taxes, West Bengal and Others. (1994)-093 STC 0408 WBTT.

6. Per-contra, learned counsel for the respondentcontended that a bare perusal of the definition ofsale price as given in Section 2 (36) of the Actmakes it clear that the discount which was allowedin the main bill being specific has already beenallowed by the Assessing Officer and the “Cashdiscount” being subjective, it could not have beenallowed. Counsel contended that even otherwise,the purchasers may or may not make such paymentsin the given time and even the explanation clearlymakes out that it is after the delivery was givenand thus not allowable and while supporting theorders of the authorities below contended thatconcurrent finding of fact has been recorded byall the three authorities, is just and proper andis not required to be interfered with.

7. I have considered the arguments advanced bythe counsel for the parties and have perused thematerial available on record.

8. It would be appropriate to quote Sections2(36), 2(40), 2(41) & 2(42) with Explanation whichreads as under:- “2(36) “Sale price” means the amount paid or payable to a dealer as considerationfor the sale of any goods less any sumallowed by way of any kind of discount orrebate according to the practice normallyprevailing in the trade, but inclusive ofany statutory levy or any sum charged foranything done by the dealer in respect ofthe goods or services rendered at thetime of or before the delivery thereof,except the tax imposed under this Act;Explanation I : In the case of a sale byhire purchase agreement, the prevailingmarket price of the goods on the date onwhich such goods are delivered to thebuyer under such agreement, shall bedeemed to be the sale price of suchgoods; Explanation II : Cash or trade discountat the time of sale as evident from theinvoice shall be excluded from the saleprice but any ex post facto grant ofdiscounts or incentive or rebates orrewards and the like shall not beexcluded;

Explanation III : Where according to theterms of a contract, the cost of freightand other expenses in respect of thetransportation of goods are incurred bythe dealer for or on behalf of the buyer,such cost of freight and other expensesshall not be included in the sale price,if charged separately in the invoice; 2(40) “taxable turnover” means, that partof turnover, as may be determined aftermaking such deductions from the totalturnover as may be prescribed on which adealer shall be liable to pay tax underthis Act; 2 (41) “turnover” means the aggregateamount of sale price received orreceivable by a dealer including purchaseprice of the goods which are subject totax under sub-section (2) of section 4[but shall exclude the sale price or partof sale price, if any, in respect of saleof goods which were purchased in theState by the dealer upon payment of taxon the maximum retail price of suchgoods, or, where tax on maximum retailprice of such goods were paid in theState on an earlier occasion]; 2(42) “VAT Invoice” means an invoicecontaining such particulars as may beprescribed, and issued by a dealer authorized under this Act;”

9. Taking into consideration the aforesaid, in myview, the Explanation-II makes it clear that onlycash or trade discount at the time of sale asevident from the invoices is required to beexcluded.

10. On perusal of the bill/invoice dt.07.07.2009which has been placed on record by the counsel forthe petitioner, it is noticed that the assesseesold goods to one Maheshwari Dresses, GandhiChowk, Near Khari Bawri, Kapasan 312 202,Rajasthan, and the discount allowed and foot-noteof the same reads as under:- Thereafter, at the foot-note of the bill, itis mentioned “cash discount of Rs.1344 @3% if paidwithin 21.08.2009”. In my view, the cash discountallowed is subjective and can only be held to beconsidered to be Ex-post facto grant of discountor incentive or rebate and nothing more.

Admittedly, delivery was given on 07.07.2009 and“Item or Special discount” has been allowed. Eventhe assessee has not reduced the so called “Cashdiscount” of Rs.1344/- from the invoice and hascharged VAT excluding the “Cash discount” ofRs.1344/-.

11. On perusal of the above, it is clear that“Item and Special discount” was allowed at thetime of delivery or at the time when the bill wasprepared, the Assessing Officer has reduced thesame and “Cash discount” which has been allowedfrom prospective date, if paid by the purchaserpays before the date mentioned in the bill, in myview, the nature remains the same of Ex-post factogrant of discount or rebate or incentive etc. thusnot allowable and whatever discount is allowed atthe time when the bill/ invoice is issued, can beallowed and has been allowed by the Assessingofficer and therefore, the reasoning is inconformity with section 2(36) and particularlyExplanation-2.

12. It would be appropriate to quote relevant paraNos.14 & 17 of the judgment of the apex court inthe caseof Madras Cement Vs. AssistantCommissioner (Audit Assessment), CommercialTaxes, Kollam and Others (2006) 147 STC 626 (Ker)which reads as under:-

“14.The short point that arises in theseWrit Petitions, is whether the cashdiscount given through credit notes,subsequent to the date of sale, but withinthe return/assessment period, should bededucted from the turnover, which is theaggregate sale consideration. I feel thatthe same can be decided, without anydifficulty, by referring to the relevantprovisions of the Act. The legislature isalways competent to make a provision,concerning, how the claim for deduction ofdiscount in the sale price can be allowed.Going by Form No. 8, prescribed under Rule58(10) of the K.V.A.T. Rules, it wasobligatory to show the gross value, thecash discount and the net value, apart fromtaxable value and tax amount. So, tax iscollected for the taxable value, which isthe aggregate of the net value and exciseduty, if any, payable. The net value isarrived at, by deducting the cash discountfrom the gross value. So, even ifsubsequently, some cash discount is given,by issuing a credit note, the same cannotbe treated as a deduction on the saleprice. The pleadings in these WritPetitions would show that trade discountgiven on the price shown in the list alwaysreflects in the tax invoice and is nevertreated as part of the turnover. But, cashdiscount in the form of credit notes aresubsequently given for prompt payment ofthe sale consideration and also forachieving targets in the sales. Though,they are called as cash discounts in factthose payments are incentive payments,which cannot be treated as part of the saleprice. As rightly pointed out by thelearned Special Government Pleader, thegoods received from the manufacturer by thewholesale dealer are re-sold to theretailer and from there, to the actualconsumer, who bears the entire tax burden.By the time cash discount is given, allthese transactions may take place. The cashdiscount can be deducted from the saleprice, if only it is shown that thewholesale dealer has made the sale afterthe receipt of the cash discount and thebenefit of the cash discount has been givento the retailer, who, in turn, has passedthe benefit to the consumer. Without anysuch claim or materials, the claim made bythe petitioners that the cash discount paidby them to their dealers should be givencredit in the sale price, cannot beaccepted. Further, along with every salecovered by the bill of sale, the manufacturer has collected tax. He cannotappropriate a portion of it, on the groundthat subsequently, he has given somediscount to his dealer.

17. An explanation newly introduced, canoperate retrospectively. It only explainswhat was always there. The said principlewill squarely apply to this case. Further,the contention that the explanation ismodifying the main provision, is also notsustainable. The VAT Act, which providesfor taxation at multi point sales andadjustment of input tax, also contemplatescollection of tax on price reduced bydiscount, which should reflect in the billof sale, as evident from Form 8. The claimof the petitioners that retrospectiveexclusion of the cash discount willseriously prejudice them, as they havealready given cash discount, cannot beaccepted. The petitioners have collectedtax from the dealers, as per the bill ofsale, which is in Form No. 8. Therefore,they are bound to pay it to the Government.If the contention of the petitioners isaccepted and the tax liability is reduced,based on the cash discount subsequentlygiven, the petitioners will be keeping aportion of the tax they have alreadycollected from the purchasing dealers. Thatwill amount to unjust enrichment. So, theclaim of the petitioners for relief, atleast in relation to the period from Aprilto August, 2005 also cannot be accepted.”

13. In my view, the judgments relied upon by thecounsel for the petitioner are distinguishable onfacts of the instant case. The language of section2(36) and Explanation is itself quite clear andthere is no ambiguity at all, so as to come to adifferent conclusion than reached by all the threeauthorities in unison. All these are findings offact based on the evidence available on record and Ido not find any infirmity, perversity or illegality inthe order of the Tax Board so as to call for anyinterference by this Court.

14. Consequently, all the petitions being devoid ofmerit, are hereby dismissed.

S.KumawatJr. P.A.

(JAINENDRA KUMAR RANKA),J.