1. These three revision petitions have been filed against the order of the Sales Tax Appellate Tribunal (Main Bench), Madras. The assessments relate to 1971-72 to 1973-74. The assessee is a manufacturer and dealer in ultramarine blue. The assessee paid 'discount' described as 'quantity discount' under a scheme subject to periodical variations. It is stated that the quantity discount is allowed on the basis of customer's off-take in a specified period. The rate of discount and the quantity to be taken are indicated in the scheme. If the purchases during a half-year period January to June or July to December exceeded, for example, 12 cases of large, medium, small or temple blue or 24 cases of some other items, etc., there will be a discount of 1 per cent and if the sales exceeded certain higher quantities, then the discount was higher. Similarly, if the total purchases by a dealer exceeded Rs. one lakh in a year, 3 per cent discount was allowed and if the turnover exceeded that figure, higher percentages were given. The idea was to see that a customer gets an incentive to place orders and increase the volume of purchases. (The word 'incentive' is on the facts to be understood in the sense that it is a present one and not for any business in future). As soon as the period is over, the purchases of each customer are totalled and credit notes were passed. In quite a number of cases, along with credit notes, cheques were sent.
2. The assessee claimed deduction of the discount. But the assessing authority rejected the claim on the ground that section 2(h) of the Central Sales Tax Act did not authorise allowance of any discount other than cash discount. The assessment thus made was confirmed on appeal. When the matter was taken on further appeal to the Sales Tax Appellate Tribunal, there was no dispute about the fact that it was a discount as understood in commercial parlance and that the discount was given in pursuance of an agreement between the parties. It was also consistent with the practice normally prevalent in the trade. The Tribunal therefore held that the conditions required by section 2(h) of the Central Sales Tax Act were fulfilled in the present case and that the discount by way of credit vouchers or otherwise were eligible for deduction. At the close of the order the Tribunal pointed out :
'Even so the appellant is entitled to succeed for all the three years in the view that the price for consideration is the price after deduction of the discount and, in the alternative view, that the credit notes, in the circumstances of the appellant's case, are equivalent to 'cash discount' within the meaning of section 2(h) of the Central Sales Tax Act, 1956.'
3. The allowance of the deduction in the manner done by the Tribunal is challenged in the present revision petitions.
4. Section 2(h) of the Central Sales Tax Act defines 'sale price' as meaning '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'. The learned Government Pleader contended that the discount in the present cases cannot be said to be cash discount so as to fall within the scope of this provision. We are unable to agree with him. The expression 'cash discount' appears to have been used in contradistinction to any other kind of discount. Supposing a dealer announces that a person purchasing 100 items of a particular article would be entitled to receive 5 more articles of same kind like a baker's dozen, the assessee cannot claim the value of the extra article paid to the purchaser as a discount. But, in the present case, there is a finding by the Tribunal to the effect that the price paid by the purchaser is after deduction of the discount. In other words, there is a tentative price paid by the purchaser which is subject to variation having regard to the quantum of purchases effected by him. In this view, it is unnecessary to go into the question of any interpretation of the cash discount at all. The amount will qualify for deduction because the sale price realised for sale of the articles would only be the net amount after adjustment of the discount.
5. The learned counsel for the revenue authorities relied on a decision of this Court in India Pistons Limited v. State of Tamil Nadu (33 S.T.C.472. In that case, the assessee had what is called a 'bonus discount scheme'. The benefit of this scheme was not extended to all the customers but only to the distributors whose net purchases of all the finished products from the assessee exceeded the target figure agreed to between the parties. The bonus discount given under that scheme was called 'rebate' and the rebate to be given was subject to certain terms and conditions. The rebate due was not to be paid in cash but credited to the current account to be adjusted against further despatches to be made against orders of the same party. The seller had also a right to vary or cancel the scheme at any time. The bonus discount adjusted in the above manner was claimed as deduction in the sales tax assessment of the assessee in that case. It was held that such 'discount' was not allowable as deduction. This decision came up for consideration in State of Tamil Nadu v. Poly-ene General Industries 39 S.T.C.254 and was explained as follows at page 257 :
'In that case, under a bonus discount scheme, the assessee, a manufacturer of pistons used in automobiles, gave to its distributors, whose net purchases exceeded a target figure, a bonus discount called a rebate, which was not received in cash by them nor did it reduce the actual sale value of the goods already purchased by them. The rebate was, however, credited to the accounts of the distributors at the end of the year and treated as a reserve which the distributors could draw upon to make future purchases. The question was whether the amount of rebate allowed to the distributors could be deducted as cash discount under section 2(h) of the Central Sales Tax Act. It was held that the rebate or bonus discount granted by the assessee did not directly or indirectly go to reduce the predetermined or prepaid sale price and that, therefore, it could not be taken to be in redaction of the actual sale price agreed or paid for the goods purchased earlier by the distributors. It was also pointed out that the issue of credit notes with the condition that they could be utilised for the purchase of the goods in future could not be treated as cash payments.'
6. The position in the present case is wholly different and therefore, there is no scope for applying the principles enunciated in India Pistons Limited ( 33 S.T.C. 472). That was a case where the manufacturer of the goods had what can be called an 'incentive' to make further purchases and not a present incentive to make current purchases in larger quantities. That was not also a case of cash discount because it could not be used except for the purpose of effecting further purchases and that it could not be utilised otherwise.
7. In State of Tamil Nadu v. Poly-ene General Industries 39S.T.C.254, the assessee, manufacturers of polythene tabular film, bags, etc., entered into a contract with a manufacturer of tobacco. The polythene liners were to be used by the tobacco manufacturers for the purpose of packing tobacco. A refund of 50 paise per liner used for packing was given on receipt of import licence for raw materials against order. The assessee's claim for deduction of the amount of 50 paise per liner from its turnover under section 2(h) of the Central Sales Tax Act was negatived by the assessing authority and the appellate authority., but was upheld by the Tribunal on the ground that though the amount was not cash discount, the price to that extent had been reduced and that the said amount did not form part of the price at all. It was held on revision by this Court that under the Central Sales Tax Act, cash discount alone is allowable as deduction and that it could be given either simultaneously with the preparation of the sale bill or subsequently and that the motive for granting such a discount is immaterial. The present case would appear to fall within the principles of this decision as, in this case, even taking the amount as a discount it was adjusted subsequently against the price.
8. The learned counsel for the assessee drew our attention to the decision in Deputy Commissioner (C.T.) v. South India Viscose Ltd. 40 S.T.C.442. In that case the assessee claimed certain rebates and the Tribunal found that the rebate had been allowed by the assessee in accordance with regular practice and, as such, that part of the turnover is not assessable to any tax inasmuch as discount was specifically deductible in the light of the definition of 'turnover' under the Tamil Nadu General Sales Tax Act, 1959, and the definition of 'sale price' under the Central Sales Tax Act, 1956. The Tribunal further pointed out that the assessee had placed its credit notes, invoices, price lists, etc., for rayon yarn which showed that the rebate formed an integral part of the agreement or contract between the assessee and its buyers. On the basis of this finding this Court held that the claim for rebate was properly allowed by the Tribunal. In the present case also, the allowance of the amount, which is called 'discount', formed an integral part of the agreement or contract between the parties and affected the price and would, therefore, call for deduction.
9. The Supreme Court in Deputy Commissioner of Sales Tax v. Advani Oerlikon (P.) Ltd. : 1981(8)ELT801(SC) considered a similar question on the following facts : The assessee disclosed a taxable turnover after deducting from the catalogue price the amount of Rs. 1,06,708 paid as trade discount by it to retailers. The Sales Tax Officer refused to allow the deduction and computed the taxable turnover at Rs. 9,78,332 and the Appellate Assistant Commissioner upheld the claim. The Tribunal confirmed the order of the Appellate Assistant Commissioner. The matter was thereupon taken on revision to the Kerala High Court which did not also succeed. The Supreme Court, in disposing of the appeal against the judgment of the Kerala High Court, pointed out at page 34 :
'It is true that a deduction on account of cash discount is alone specifically contemplated from the sale consideration in the definition of 'sale price' by section 2(h), and there is no doubt that cash discount cannot be confused with trade discount. The two concepts are wholly distinct and separate. Cash discount is allowed when the purchaser makes payment promptly or within the period of credit allowed. It is a discount granted in consideration of expeditious payment. A trade discount is a deduction from the catalogue price of goods allowed by wholesalers to retailers engaged in the trade. The allowance enables the retailer to sell the goods at the catalogue price and yet make a reasonable margin of profit after taking into account his business expense. The outward invoice sent by a wholesale dealer to a retailer shows the catalogue price and against that a deduction of the trade discount is shown. The net amount is the sale price, and it is that net amount which is entered in the books of the respective parties as the amount realisable.'
10. The decision in India Pistons Limited 33S.T.C.472was noticed by the Supreme Court at page 35 and it was pointed out that the rebate of bonus discount was not allowed by this Court because it was in the nature of an incentive bonus paid to distributors whose net purchases exceeded the target figure, and did not and could not affect the sale value of the goods sold by the assessee as the sale price remain undisturbed in the contract between the parties. That is not the position in the present case. Implicit in the decision of the Supreme Court is the proposition that even if the amount adjusted does not fall strictly within the concept of cash discount, still the amount is capable of adjustment in the sales tax assessment provided it goes to vary the price payable in respect of the goods. There is thus no error committed by the Sales Tax Appellate Tribunal and, therefore, these revision petitions fail and are dismissed with costs. Counsel's fee Rs. 250 (one set).
11. Petitions dismissed.