Sales Tax - 'sale price' apart from including consideration for sale, also includes value of any discount or rebate offered, which is to be deducted from sale price: SC
BY TIOL NEWS SERVICE
NEW DELHI, FEB 23, 2018: THE issue before the Apex Court was - Whether the term 'sale price' apart from including the consideration for sale, also includes the value of any discount or rebate offered, which is to be deducted from the sale price. YES is the answer. Thereby, the Court also decided upon the issue as to whether where the price of a commodity is paid in excess of the stipulated price, can the excess amount be refunded, when the stipulated price is subsequently reduced by the authority concerned. YES is the answer here too.
Facts of the case
The assessee-company manufactures cylinders for storing Liquefied Petroleum Gas (LPG). All the cylinders produced by the assessee were supplied to companies run by the Govt., namely M/s Indian Oil Corporation Ltd. (IOCL) and M/s Bharat Petroleum Corporation Ltd. (BPCL). Besides, the cost of the cylinders was determined by the Ministry of Petroleum and Natural Gas, under the pricing policy. In 2000, the IOCL placed an order for about 70000 cylinders, which were supplied by the assessee at Rs 682/- per cylinder, along wih sales tax. Later, IOCL wrote to the assessee stating that the price of 14.2 Kg cylinders was provisionally revised to Rs.645/- per cylinder w.e.f. July, 1999. Thereafter, the oil companies deducted the excess payment of Rs 37/- and proportionate sales tax thereon from the payments due to the assessee. Later, the assessee claimed refund of the sales tax paid on the excess sale amount, reasoning that since tax was paid on the provisional price of Rs.682/- per cylinder, and the price had been reduced to Rs 645/-. Since the oil companies took refund of Rs 37/-, refund of tax paid on the excess amount was sought. The assessee also claimed that such Rs 37/- not be included in its total turnover. However, the AO rejected the claim of the assessee, holding there to be no provision under the Act for reducing or refunding the amount of tax once paid. The AO also held the arrangement between the assessee and the oil companies to be a private agreement, not concerning the Department. Although the Deputy Commr. allowed refund to the assessee, subsequently, the High Court dismissed the assessee's appeal, holding that the assessee was entitled to receive the amount of Rs 682/- per cylinder and if it gave any discount, no refund of the same could be claimed. Hence the present appeal.
On hearing the matter, the Apex Court was of the view that,
++ considered the decision of the Apex Court in IFB Industries Limited v. State of Kerala , defining the term 'turnover'. Also considered decision of the Gujarat High Court in ONGC v. State of Gujarat , wherein in similar circumstances, it was held that discount did not form part of sale price. A similar view was taken by the Madhya Pradesh High Court in Gail India Ltd. v. State of M.P. Further, a reading of Section 2(39) of the Act, which defines 'sale price' clearly indicates that it is the price which is either paid or payable to a dealer as consideration for the sale. The definition itself makes it clear that any sum by way of any discount or rebate according to the practice normally prevailing in the trade shall be deducted and shall not be included in the sale price. The definition of 'turnover' means the aggregate amount received or receivable by a dealer;
++ presently, when the orders were placed with the assessee, the price was not finalized by the MoP & NG. There was a clear cut stipulation in the purchase order that the price of Rs 682/- is only a provisional price subject to review and it was clearly understood by the parties that the final price applicable after 01.07.1999 will be the price as approved by the MoP & NG. Therefore, though the assessee may have received Rs 682/- per cylinder, it was under a legal obligation only to receive that price which was fixed by the MoP & NG. This price could have been higher than Rs 682/- per cylinder, in which event the assessee would have had to collect and deposit with the Rajasthan Sales Tax Department sales tax on the excess amount. However, since the price of the cylinder has been reduced, the assessee cannot charge more than the price fixed, is bound to refund the excess amount collected and is therefore legally entitled to get refund of the tax paid on the excess amount;
++ it is undisputed that the assessee had to refund the amount of Rs 37/- per cylinder to the oil companies. Therefore, what it has actually received is only Rs 645/- per cylinder. What was legally receivable by it was the amount to be finally fixed by the MoP & NG i.e. Rs 645/- per cylinder. In the supply order only a provisional price was fixed. Further, the price fixation is not in the hands of the assessee. It is not even in the hands of the oil companies. The price is fixed by the MoP & NG and in such an eventuality, the amount actually payable is the amount to be fixed by the MoP & NG and that is also the amount which the assessee is legally entitled to receive. Hence order of the Deputy Commr. granting the refund sought by the assessee is restored. The assessee shall be entitled to interest at the rate of 9% per annum on the amount payable to it from the date of the order of the Deputy Commissioner till payment of the amount.
(See 2018-TIOL-70-SC-CT)
