M/S Ifb Industries Ltd vs State Of Kerala

4. M/s IFB Industries Ltd. is a manufacturer of home appliances. It has a scheme of trade discount for its dealers under which the dealer, on achieving a pre-set sale target gets certain discount on the price for which it purchased 3 the articles from the manufacturer, the appellant. As the discount is subject to achieving the sale target the dealer would naturally qualify for it in the later part of the financial year/assessment period, that is to say, long after the sales took place between the appellant and its dealer. For the sales taking place between the appellant and its dealer after the sale target is achieved, the dealer would of course get the articles on the discounted price but for the sales that took place before the sale target was achieved, the appellant would issue credit notes in favour of the dealer. The Assessing Authority, in principle, accepted the appellant's claim for deduction of the amount of discount given by it to its dealers through credit notes under rule 9(a) of the Rules and it was only a dispute over computation that took the matter to the High Court and the High Court held that the discount in question was not trade discount at all and it was not eligible for deduction in terms of rule 9(a).

5. The case of the appellant (M/s IFB Industries Ltd.) relates to assessment periods 2001-02 and 2002-03. Dealing with the assessment periods 2001-02, the Assistant Commissioner (Assessment), Commercial Taxes, (the Assessing Authority) in its order dated January 27, 2006 observed that the dealer had given discount to the tune of Rs.58,15,485/- and 4 as the discount was allowable in ordinary course of business, that turnover was allowed as exempted.

10. Be that as it may, the appellant preferred appeals against the Assessment Order (Sales Tax Appeal Nos. 219 & 220 of 2006) in which it also took the objection that the computation made by the Assessing Authority by first adding up the amount of trade discount and only then deducting it from the turnover denied it the exemption of trade discount which the Assessing Authority had himself allowed in the earlier part of his order. It is significant to note, however, that in the appeal also it was never 6 stated that the figure of Rs.14,27,69,607/- forming the basis of the computation included the amount of trade discount of Rs.58,15,485/-.

12. Against the order passed by the Appellate Authority, the Revenue preferred appeals (T.A. Nos. 429 & 430 of 2006/C.O. 67 & 68 of 2006) before the Kerala Sales Tax Appellate Tribunal and the Tribunal by its order dated February 28, 2007 allowed the Revenue's appeals holding that since there was no assessment on trade discount, the direction of the Assessing Authority to verify whether there was a mistake in this computation was without any basis.

13. The appellant made a Rectification application but it was rejected by the Tribunal by order dated August 29, 2008.

(emphasis added)

34. On the basis of the discussions made above and in light of the earlier decisions of the Court, we are unable to sustain the orders of the Kerala High Court coming under appeal. The impugned orders in both the appeals are set aside. The cases of the appellants for the respective assessment periods are 19 remitted to the Assessing Authority with a direction to make assessments and pass fresh orders in accordance with law and in light of this judgment.

The Assessing Authority shall not reject the appellants' claim for exemption of the amounts of trade discount solely on the ground that the discount amounts were not shown in the sale invoices.

35. In the result the appeals are allowed but with no orders as to cost.

February 27, 2012.