Civil Appeal No 1897 of 1976 
Appeal by Special Leave from the Judgment and order dated 24 10 1975 of the Kerala High Court in TRC No 8674
Dr V A Seyid Muhammed and K R Nambiar for the Appellant
Dr Y section Chitale and Mrs Sunanda Bhandare for the Respondent
The assessee is a private limited company carrying on business as sole selling agent for a certain brand of welding electrodes
For the goods supplied to retailers it charged them the catalogue price less trade discount
The catalogue price is the price which the retailer is entitled to charge the consumer
For the assessment year 1971 72 the returns filed under the showed a taxable turnover of inter State sales amounting to Rs 871624
This figure was derived by deducting from the catalogue price the amount of Rs 106708 paid as trade discount by the assessee to retailers
The 933 Sales Tax Officer refused to allow the deduction and computed the taxable turnover at Rs 978332
The Sales Tax Officer was of the view that the amount paid by way of trade discount could not be excluded from the catalogue price
The assessee appealed and the Appellate Assistant Commissioner upheld its claim that trade discount did not form part of the turnover and it could not therefore attract sales tax
A second appeal filed by the Revenue was dismissed by the Appellate Tribunal
The Revenue applied in revision to the High Court of Kerala and the revision application has been dismissed
The Revenue appeals
It is contended before us by the Revenue that the High Court has erred in affirming that an amount paid by way of trade discount cannot be included in the taxable turnover for the purpose of assessment
It is pointed out that the definition of sale price in section 2h of the permits the deduction of sums allowed as cash discount only and makes no reference to sums allowed by way of trade discount
It is contended that in effect the assessee enters into two distinct contracts with the retailer the first contract relates to the sale of goods at the catalogue price and the second contract stipulates that notwithstanding the liability of the retailer under the first contract to pay the entire sale price he may actually pay the sale price less trade discount
On that submission it is sought to be urged that since the sale is effected under the first contract the entire amount treated as consideration for the sale under that contract has to be included in the taxable turnover
We have considered the matter carefully and in our judgment the appeal must fail
At the outset it is appropriate that we set forth the two relevant definitions contained in the 
Section 2j defines turnover to mean the aggregate of the sale prices received and receivable by him the dealer in respect of sales of any goods in the course of inter State trade or commerce    
And section 2h of the Act defines the expression sale price to mean the amount payable to a dealer as consideration for the sale of any goods less any sum allowed as cash discount according to the practice normally prevailing in the trade    
It is true that a deduction on account of cash discount is alone specifically contemplated from the sale consideration in the definition of sale price by section 2h and there is no doubt that cash discount cannot be confused with trade discount
The two concepts are wholly distinct and separate
Cash discount is allowed when the purchaser makes payment 934 promptly or within the period of credit allowed
It is a discount granted in consideration of expeditious payment
A trade discount is a deduction from the catalogue price of goods allowed by wholesalers to retailers engaged in the trade
The allowance enables the retailer to sell the goods at the catalogue price and yet make a reasonable margin of profit after taking into account his business expense
The outward invoice sent by a wholesale dealer to a retailer shows the catalogue price and against that a deduction of the trade discount is shown
The net amount is the sale price and it is that net amount which is entered in the books of the respective parties as the amount realisable
Orient Paper Mills Ltd vs State of Orissa
Under the  the sale price 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 2h 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
Nor is there any question here of two successive agreements between the parties one providing for sale of the goods at the catalogue price and the other providing for an allowance by way of trade discount
Having regard to the nature of a trade discount there is only one sale price between the dealer and the retailer and that is the price payable by the retailer calculated as the difference between the catalogue price and the trade discount
There is only one contract between the parties the contract being that the goods will be sold by the dealer to the retailer at the aforesaid sale price
We have been referred to Ambica Mills Ltd  Ors
vs The State of Gujarat  Anr
Where the Gujarat High Court rejected the claim of the manufacturer to a deduction of the remission allowed from the sale price to the purchaser on account of a general fall in prices when delivery of the goods was effected
In our opinion the case supports the view we are taking
The sale price remained the stipulated price in the contract between the parties
The fail in prices 935 occurred after the contract of sale had been finalised and with a view to relieving the purchaser to some extent of the loss which could have been occasioned thereby the manufacturer sought to bear part of the loss by granting a rebate or remission to the purchaser
The Revenue relies on India Pistons Limited vs State of Tamil Nadu
In that case the bonus of which deduction was sought by the assessee from the turnover was paid under a bonus discount scheme not to all customers but only to distributors whose net purchases from the assessee exceeded the target figure agreed to between the parties
The amount of rebate allowed was credited to the customer s account and treated as a reserve from which the distributors could make future purchases
The rebate of bonus discount was not allowed as a deduction by the Madras High Court and in our opinion rightly so
It was in the nature of an incentive bonus paid to distributors whose net purchases exceeded the target figure
It did not and could not affect the sale value of the goods sold by the assessee
The sale price remained undisturbed in the contract between the parties
In our judgment the sale price which enters into the computation of the assessee s turnover for the purpose of assessment under the is obtained after deducting the trade discount from the catalogue price
The trade discount allowed by the assessee cannot be included in the turnover
In the result the appeal fails and is dismissed with costs
NKA Appeal dismissed


Summary:
The respondent assessee is a private limited company carrying on business as sole selling agents for a certain brand of Welding Electrodes
It charged the catalogue price less trade discount from retailers for the goods supplied
The catalogue price is the price which the retailer is entitled to charge the consumer
The returns field under the  showed a taxable turnover of inter state sales amounting to Rs 871624 for the assessment year 1971 72
This figure was derived by deducting Rs 106708 from the catalogue price paid as trade discount by the assessee to the retailers
The Sales Tax officer refused to allow the deduction and computed the taxable turnover at Rs 978332 
On appeal the Appellate Assistant Commissioner upheld the assessee s claim that trade discount did not form part of the turn over and could not therefore attract sales tax
A second appeal was dismissed by the Appellate Tribunal
A revision application by the Revenue to the High Court was also dismissed
It was contended i that the High Court erred in affirming that an amount paid by way of trade discount could not be included in the taxable turnover for the purpose of assessment ii that in effect the assessee entered into two distinct contracts with the retailer the first contract related to the sale of goods at the catalogue price and the second contract stipulated that the retailer could actually pay the sale price less trade discount and that since the sale was effected under the first contract the entire amount treated as consideration for the sale under that contract had to be included in the taxable turn over
Dismissing the appeal  HELD It is true that a deduction on account of cash discount is alone specifically contemplated from the sale consideration in the definition of Sale price by section 2h and that cash discount cannot be confused with trade discount
They are two separate and distinct concepts
Cash discount is allowed when the purchaser makes payment promptly or within the period of credit allowed
It is a discount granted in consideration of expeditious payment
A trade discount is a deduction from the catalogue price of goods allowed by wholesalers to retailers engaged in the trade
The allowance enables the retailer to sell the goods at the catalogue price and yet make a reasonable margin of profit after taking into account his business expense
The outward invoice sent by a wholesale dealer to a retailer shows the catalogue price and against that a deduction of the trade discount is shown
The net amount is the sale price and it is that net amount which is entered in the book s of the respective parties as the amount realisable
933 G H934A C 932 Orient Paper Mills Ltd vs State of Orissa 1975 35 STC 34 referred to
Under the Sales Tax Act
the sale price which enters into the computation of the turnover is the consideration for which the goods are sold by the assessee Where trade discount if allowed on the catalogue price the sale price is the amount determined after deducting the trade discount
It is immaterial that the definition of Sale Price in section 2h of the Act does not expressly provide for the deduction of trade discount from the sale price
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
Nor is there any question here of two successive agreements between the parties one providing for sale of the goods at the catalogue price and the other providing for an allowance by way of trade discount
Having regard to the nature of trade discount there is only one sale price between the dealer and the retailer and that is the price payable by the retailer calculated at the difference between the catalogue price and the trade Discount
There is only one contract between the parties the contract being that the goods will be sold by the dealer to the retailer at the aforesaid sale price
The sale price which enters into the computation of the assessee s turnover for the purpose of assessment under the Sales Tax Act is obtained after deducting the trade discount from the catalogue price
The trade discount allowed by the assessee cannot be included in the turnover
934 C E F 935 Orient Paper Mills Ltd vs State of Orissa 1975 35 STC 84 Ambica Mills Ltd vs The State of Gujarat and another 1964 15 STC 367 affirmed
India Pistons Ltd vs State of Tamil Nadu 1974 33 STC 472 distinguished