Skip to content


Sirpur Paper Mills Limited Vs. State of Andhra Pradesh - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case Number Tax Revision Cases Nos. 11, 12 and 13 of 1977
Judge
Reported in[1979]43STC126(AP)
AppellantSirpur Paper Mills Limited
RespondentState of Andhra Pradesh
Appellant Advocate P. Venkatarama Reddy and ; A.K. Jaiswal, Advs.
Respondent Advocate The Government Pleader for Commercial Taxes
Excerpt:
.....the landlords have got acquired or accrued right to continue the proceedings despite the coming into force of the amended provision. - the amount credited under the head 'discount' is called 'balance discount'.the method followed by the assessee in allowing the balance discount is like this:.....and paid to the distributor by it towards the distributor's share of discount constitutes the sale price or turnover of the goods sold to the customer. the only other question that pertains to t. r. c. nos. 11 and 12 is whether the sale of unserviceable and scrap materials is exigible to tax under the central sales tax act.3. the facts necessary for determining the questions involved are these : the assessee-company manufactures paper at its factory at sirpur and sells the same to the customers. the customers place orders through up-country distributors. under the terms of the agreement between the distributors and the assessee-company, the assessee-company has to give a discount at a fixed rate varying from time to time. the amount credited under the head 'discount' is called.....
Judgment:

Obul Reddi, C.J.

1. These three revisions relate to one and the same assessee, M/s. Sirpur Paper Mills Limited, Hyderabad. T. R. C. Nos. 11 and 12 of 1977 arise out of a common order and T. R. C. No. 13 of 1977 arises out of another order made by the Tribunal.

2. In all the three revisions, the main question that falls for consideration is whether the amount of discount received from the customer by the assessee and paid to the distributor by it towards the distributor's share of discount constitutes the sale price or turnover of the goods sold to the customer. The only other question that pertains to T. R. C. Nos. 11 and 12 is whether the sale of unserviceable and scrap materials is exigible to tax under the Central Sales Tax Act.

3. The facts necessary for determining the questions involved are these : The assessee-company manufactures paper at its factory at Sirpur and sells the same to the customers. The customers place orders through up-country distributors. Under the terms of the agreement between the distributors and the assessee-company, the assessee-company has to give a discount at a fixed rate varying from time to time. The amount credited under the head 'discount' is called 'balance discount'. The method followed by the assessee in allowing the balance discount is like this: The assessee-company has its own distributors. They receive orders for supply of paper. On receipt of the orders, the assessee-company prepares bills in the names of the customers and allows certain discount to the customer in the bill itself and the goods are despatched directly to the customer. Afterwards the assessee deducts the discount called 'balance discount' from out of the sale amount shown in the bill and credits the same to the account of the agent or distributor at regular intervals. It is this 'balance discount', according to Mr. P. Venkatarama Reddy, that has been included in the turnover by the department making it exigible to tax. The learned counsel invited our attention to the definition of 'sale price' in Section 2(h) of the Central Sales Tax Act in support of his contention. 'Sale price' means the amount payable to a 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, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in case where such cost is separately charged. It is Mr. Venkatarama Reddy's case that what is paid by the assessee or credited by the assessee to the account of the customer does not form part of the consideration for the sale of the goods and, therefore, it cannot be included in the taxable turnover of the assessee.

4. 'Turnover', as defined in Section 2(j) of the Central Sales Tax Act, used in relation to any dealer liable to tax under the Act, means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period and determined in accordance with the provisions of the Act and the Rules made thereunder. Admittedly, the sum allowed as discount is not cash discount. Therefore, the only question is what is the amount payable to the assessee as consideration for the sale of goods. In the bill, the amount shown, as 'balance discount' is included in the sale price. The deduction is made subsequent to the sale of the goods by way of credit note. The expression 'turnover' takes within its wide range or ambit, the aggregate of the sale prices received and receivable by the dealer in respect of the sale of goods effected by him. It is the aggregate amount that constitutes the turnover or the sale price.

5. Any sum charged, whatever be the description, name or object thereof, will come within the wide and sweeping character of the meaning of 'turnover'. The buyer pays the total amount of the bill, though the bill is split up into sale price and the balance, as discount payable to the distributor. It is immaterial what the dealer does subsequently so long as the payment is in respect of the goods sold, though the sale price is split up into . more than one item. We, therefore, hold that a reading of the two definitions of 'sale price' and 'turnover' would make it abundantly clear that 'balance discount' forms part of the sale price of the goods sold by the assessee. The Tribunal has rightly disallowed the deduction claimed in respect of the turnover in this regard.

6. As regards the sale of scrap material, we must hold that the Tribunal was in error in holding that the turnover relating to the sales of scrap material is exigible to tax (see State of Gujarat v. Raipur . [1967] 19 S.T.C 1 (S.C.). The turnover relating to sales of scrap material was not exigible to tax prior to 1976 amendment of the Central Sales Tax Act.

7. Mr. Venkatarama Reddy also contended that the assessee only acted under the instructions of the customer, in other words, as his agent and that the assessee's only function was to credit the 'balance discount' to the account of the distributors. It makes no difference, as already pointed out by us, in view of the definitions of 'sale price' and 'turnover'.

8. In the result, T. R. C. Nos. 11 and 12, in so far as the turnovers relating to 'balance discount' paid to the distributors are concerned, are dismissed and allowed in so far as the turnover relating to the sale of scrap material is concerned. T. R. C. No. 13 of 1977 is dismissed as it only relates to the turnover representing the 'balance discount'. No costs. Advocate's fee Rs. 200 in each.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //