Case: Deputy Commissioner Of Sales Tax (Law) Board Of A Revenue(T Vs. Advani Oorlikon (P) Ltd. Trivandrum

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 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. 4. We have considered the matter carefully and in our judgment the appeal must fail. 5. At the outset, it is appropriate that we set forth the two relevant definition contained in the Central Sales Tax Act. Section 2(i) 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 2(h) of the Act defines the expression "sale price" to mean amount payable to 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 comtemplated from the sale consideration in the definition of "sale price by section 2(h), and there is no doubt that cash discount cannot be confused with trade discount. The two concepts are wholly distinct and separate. Cash discounts 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 allowed 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. v. State Orissa - (1975) 35 S.T.C. 84. 6. Under the Central Sales Tax Act, the sale price which entres 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 prior to it. It is immaterial that the definition of "sale price" in Section 2(h) of the Act does not expressly provided 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 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. 7. We have been referred to Ambica Mills Ltd. & Ors. v. The State of Gujarat & Anr - (1964) 15 STC 367. 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 fall in prices 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 v. State of Tamil Nadu - (1974) 33 S.T.C. 472. 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 customers 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 assessees. The sale price remained undisturbed in the contract between the parties. 8. In our judgment, the sale price which enters into the computation of the assessees turnover for the purpose of assessment under the Central Sales Tax Act is obtained after deducting the trade discount from the catalogue price. The trade discount allowed by the assesee cannot be included in the turnover.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]4. We have considered the matter carefully and in our judgment the appeal must failIt is immaterial that the definition of "sale price" in Section 2(h) of the Act does not expressly provided 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 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 price8. In our judgment, the sale price which enters into the computation of the assessees turnover for the purpose of assessment under the Central Sales Tax Act is obtained after deducting the trade discount from the catalogue price. The trade discount allowed by the assesee cannot be included in the turnover.