STATE OF MADRAS Vs. JEEWANLAL 1929 LTD

JUDGEMENT

(1.) THERE are two items of turnovers, which are in dispute in this case. The first item, Rs. 66,492. 09 relating to the assessment year 1964-65, is claimed by the assessee as sales discount liable to be deducted from the taxable turnover. The second item relates to a sum of Rs. 14,089. 61 representing the turnover of canteen sales, which, according to the assessee, cannot be taxed under the Tamil Nadu General Sales Tax Act.

(2.) SO far as the first item is concerned, the assessee's claim for exemption on the ground that it represented the sales discount did not find favour with the assessing authority as well as the Appellate Assistant Commissioner. But the said claim was accepted by the Tribunal on the ground that the said sum is liable to be exempted as sales discount under clause (iii) of explanation (2) to section 2 (r) of the Tamil Nadu General Sales Tax Act read with rule 5-A (a) of the Tamil Nadu General Sales Tax Rules. Before us, the revenue questions the correctness of the said view taken by the Tribunal. According to the revenue, the said sum will not fall under clause (iii) of explanation (2) to section 2 (r) of the Act and, therefore, the assessee is not entitled to claim deduction in relation thereto. It is pointed out by the learned Government Pleader that the assessee is in the habit of giving two discounts, one at the rate of 12 per cent on the invoice value at the time of the preparation of the invoice, and the other, an extra discount 5 to 9 per cent of the aggregated invoice value at the end of the month, and that the disputed sum of Rs. 66,492. 09 represents the amounts given as the extra discount at the end of the month. According to the revenue, clause (iii) of explanation (2) to section 2 (r) of the Tamil Nadu General Sales Tax Act, and rule 5-A (a) of the Tamil Nadu General Sales Tax Rules contemplate the discount being given only at the time of the sale of the goods, and that the extra discount given at the end of the month without reference to any particular sale cannot attract the said exemption provisions. Explanation (2) to section 2 (r) of the Act, in so far as it is relevant, is set out below : " Subject to such conditions and restrictions, if any, as may be prescribed in this behalf. . . . . . (iii) 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. . . . . . " Rule 5-A (a) provides : " In pursuance of explanation (2) to section 2 (r) of the Act, the amounts specified in the following clauses shall not, subject to the conditions specified therein, be included in the total turnover of a dealer :- (a) all amounts allowed as discount, provided that such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of a contract or agreement entered into in a particular case, and provided also that the accounts show that the purchaser has paid only the sum originally charged less the discount. " Clause (iii) of explanation (2) to section 2 (r) read along with the above rule makes it clear that all amounts allowed either as cash discount or other discount on the price payable in respect of any sale in accordance with the regular practice of the dealer or in accordance with the terms of any contract entered into between the seller and the purchaser will not form part of the total turnover of the dealer. The contention of the learned Government Pleader that it is only the discount that is given at the time of the sale that will come within the category of discount contemplated by the above statutory provisions, ignores, in our view, the effect of the words "any cash or other discount". If the section has referred only to a cash discount, then the contention of the learned counsel may have some force. But when the statute uses the words "any cash or other discount", the benefit of exemption cannot be denied to an assessee merely because the discount is not given either in cash or at the time the invoice is prepared. The learned Government Pleader also particularly refers to the proviso found in rule 5-A (a ). But, in our view, that proviso is intended to see that as per the accounts of the assessee, it is only the price as discounted that is ultimately paid by the purchaser, and not more. We are not able to read the above statutory provisions in a restricted manner so as to cover only those discounts which are given either at the time of the preparation of the invoice or with reference to a particular sale. It is well-known that a scheme of discount adopted by commercial circles is normally of two types - cash discount and trade discount - and a discount normally denotes a deduction from the amount due as price of goods in consideration of its being paid promptly or in advance. Trade discount is the one allowed to a customer if he places an order for a certain amount or quantity or more. Such a discount is given to encourage a buyer to buy more at a time or within a period of time. When the Legislature has specifically used the words "cash or other discount", it must be taken that it was aware of the normal trade practice in commercial circles of giving cash or other discounts.

(3.) ON a due consideration of the matter, we are of the view that the Tribunal has come to the right conclusion in this case so far as the first item is concerned. As regards the second item, it represents canteen sales. The recent decision of the Supreme Court in State of Tamil Nadu v. Burmah Shell Co. Ltd. ([1973] 31 S. T. C. 426 (S. C.)) throws considerable light. Before the amendment of the definition of "business" in section 2 (d) by the Tamil Nadu Act 15 of 1964 with effect from 1st September, 1964, it has been consistently held both by this court and the Supreme Court that such canteen sales are not taxable as sales under the Tamil Nadu General Sales Tax Act on the ground that they are neither sales in the course of business nor have they been effected with a view to make a profit. But it has been held by the Supreme Court in the above decision that after the amendment of the definition of "business", the canteen sales will come under the definition of "sale" in the Tamil Nadu General Sales Tax Act and whether the profit element is there or not, they are liable to be taxed. In view of the abovesaid decision, the canteen sales that took place after 1st September, 1964, will be clearly taxable subject to the operation of G. O. No. 2238, Revenue, dated 1st September, 1964. The Tribunal has, however, held that the entire turnover relating to the canteen sales is entitled to exemption. Now that we have held following the above decision of the Supreme Court that the canteen sales after 1st September, 1964, will become taxable, the actual turnover before and after 1st September, 1964, has to be worked out, and the petitioner's liability to sales tax in relation to the canteen sales after 1st September, 1964, has to be considered afresh in the light of the observations of the Supreme Court. For that purpose, we remit the matter to the Tribunal.