JAY ENGINEERING WORKS LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) THIS tax revision case raises a somewhat interesting question. The question of law which has been formulated in the memorandum of revision in accordance with the form prescribed, is as follows : " Is not the sales returns of Rs. 98,400 liable to be deducted under rule 9 (b) of the Kerala General Sales tax Rules from the total turnover for the year 1972-73, as the goods were returned within three months from the date of delivery of the goods and its sales turnover was returned and taxed when the sales were made ?" The assessee is a dealer in fans, sewing machines and spare parts. For the assessment year 1972-73, they returned before the Assistant Commissioner of Sales Tax, Special Circle, Ernakulam, total and taxable turnovers of Rs. 53,31,654. 38 and Rs. 52,02,943. 27. Exemption was claimed in respect of a turnover of Rs. 1,28,711. 11. The turnover in respect of which exemption was claimed was made up of Rs. 30,311. 11, under sales to Indian Naval Services Canteen, and Rs. 98,400 under the sales returns. The first item was allowed, and the second was disallowed on the ground that this was not included in the turnover for the year in question. The year in question was 1972-73. The claim for exemption of the turnover was based on rule 9 (b) of the Kerala General Sales Tax Rules, which is as follows : " 9. Determination of taxable turnover.- In determining the taxable turnover, the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of the dealer :. . . . . . (b) (i) all amounts allowed to purchasers in respect of goods returned by them within a period of 3 months from the date of delivery of the goods, to the dealer when the goods are taxable on the amount for which they have been sold provided that the accounts show the date on which the goods were returned and the date on which and the amount for which refund was made or credit was allowed to the purchaser; (ii) all amounts received from the sellers in respect of goods returned to them within a period of 3 months from the date of delivery of goods by the dealer when the goods are taxable on the amount for which they have been bought provided that the accounts show the date on which the goods were returned and the date on which and the amount for which refund was received;. . . . . . . . . " The rule allows deduction of all amounts to purchasers in respect of goods returned by them within a period of three months from the date of delivery of the goods to the dealer when the goods are taxable to the dealer. It seems to us plain that the claim for refund can be made only after the return of the goods. In this case, the goods were returned in April; and the claim for exemption could have been made only subsequent thereto as it was actually made. It appears to us, at the first blush at any rate, to be rather impracticable that the claim should have been negatived on the ground that for the assessment year in question, viz. , 1972-73, the turnover in respect of which the exemption was claimed, was not included in the return of assessment. It could not obviously be so included, as the return of the goods itself was only subsequent to the close of the assessment year on 31st March, 1972.

(2.) BUT this view which commends itself to us at the first blush on the language of the rule, and which seems to be supported, as we shall show, by a decision of the Madras High Court and another decision of the Andhra Pradesh High Court, has been strongly objected to by the learned Government Pleader. The learned Government Pleader argued with force that the rule should not be read and construed in isolation, but must be related to the provisions of the Act. He invited our attention to the definition of "turnover" in section 2 (xxvii) of the Act. That section defines "turnover" as the aggregate amount for which the goods are either bought, or sold, or supplied or distributed by a dealer, either directly or through another. We omit the rest of the words of the main part of the definition as not material. There is explanation (2), which is important, and which reads as follows : " Explanation (2 ).- Subject to such conditions and restrictions, if any, as may be prescribed in this behalf, - (i) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of, or before, the delivery thereof; (ii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; and (iii) where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same to the said customer, the sale in respect of such goods shall be included in the turnover of the latter dealer but not in that of the former. " We are here concerned with clause (ii) of the explanation. That furnishes the statutory basis for earning exemption from assessment of the turnover or from non-inclusion in the turnover. The mode and the manner of earning the exemption is provided by rule 9 (b) of the Rules, which is in discharge of the statutory obligation indicated by clause (ii) of explanation (2 ). Attention was called by the Government Pleader to the provisions of section 5, which emphasises that every dealer shall pay tax on his taxable turnover for that year. This provision was stressed to emphasise that the scheme of the Act was to make each assessment year the unit of assessment, and to reckon the turnover and exemption with respect to each year of assessment. In the light of these provisions, the learned Government Pleader argued that the view taken by the Tribunal is correct and was not open to interference.

(3.) AS stated at the outset, the language of the rule and its scope and purpose, make it clear that the claim for deduction can be made only subsequent to the return of the goods and the refund of their sale price. In the instant case, it could not possibly be made till after April, 1972. It cannot affect the assessee's claim for deduction from turnover that, for the assessment year 1972-73, this turnover was not included and, on that ground the assessee's claim for deduction cannot be denied. It would neither be logical nor reasonable to insist on a claim for refund being made in the course of the assessment year during which the sale of the goods has been occasioned, when the goods themselves are returned and the claim for refund itself can arise only beyond the assessment year. The view that we take is supported by the two rulings of the Madras High Court in Madras Radiators and Pressings v. State of Tamil Nadu ([1976] 37 S. T. C. 123) and Devi Films (Private) Ltd. v. State of Madras ([1961] 12 S. T. C. 274), and by the ruling of the Andhra High Court in State of Andhra Pradesh v. Vauhini Pictures P. Ltd. ([1962] 13 S. T. C. 847 ).