INDIAN VEGETABLE PRODUCTS LTD Vs. STATE OF BOMBAY
SALES TAX TRIBUNAL
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(1.) THESE are two revisional applications preferred by Messrs Indian Vegetable Products Ltd., which raise a common question and the question arises in this way.
(2.) THE applicants made certain sales and the sale price included an item called railway freight. The contention on behalf of the applicants is that the price realised by the applicants after deduction of the railway freight constitutes the sale price for the purpose of assessment under the Bombay Sales Tax Act, 1953 (unamended), arid the short question is whether the amount of the railway freight is a cash discount within the meaning of Section 2(14) of the Act. Section 2(14) defines the expression "sale price" as meaning the amount payable to a dealer as valuable consideration for the sale of any goods, less any sum allowed as cash discount according to trade practice, but including any sum charged for anything done by the dealer in respect of goods at the time of or before delivery thereof, other than the cost of freight or delivery or the cost of installation when such cost is separately charged. Mr. Tamhane who appears for the applicants contends that the amount of railway freight falls within the expression "any sum allowed as cash discount according to trade practice" and if Mr. Tamhane is right then there can be no question that the sale price realised by the applicants would be the amount of the price minus the railway freight. It is, therefore, necessary to examine the validity of this argument. The facts are not in dispute. That the goods were sent by the railway is not in dispute nor is it disputed that at the other end the purchasers paid the amount of the railway freight in order to have the goods released. Mr. Tamhane says that although the purchasers paid the amount of the railway freight in order to release the goods, the applicants gave them credit for the fare paid by them. His contention, therefore, is that what they realised as a sale price is the amount of the price after deducting the amount of the railway freight. In other words, the position is that the applicants sold the goods to their purchasers and bore the railway expenses. Mr. Tamhane argues that the expenses of transport could not properly be regarded as constituting part of the sale price of the goods sold. To claim this deduction Mr. Tamhane has been unable to cite any relevant Section in the Act. But he strongly relies upon the definition of the expression "sale price" as defined in Section 2(14). He relies upon the words "less any sum allowed as cash discount according to trade practice." To claim this deduction it is necessary that the deduction must be a cash discount and it must be according to trade practice. It is evident that the expression "according to trade practice" governs the expression "cash discount." The discount must be cash and it must be in accordance with the trade practice. In other words, in order to bring cash discount within the definition the discount must have a sanction of trade practice. The discount must, therefore, be recognised according to the trade practice. The goods may be sold in one of two ways. Goods may be sold for price paid in cash or goods may be sold for a price on credit and it is quite conceivable that where the amount of the price paid is in cash a dealer may allow a discount against cash payment. The advantage of allowing a discount against cash is that the seller receives money in cash and not on credit. In the case of a sale upon credit the payment of the price' is deferred and it is fairly clear that from the point of view of a dealer it is better to have a cash transaction than one of credit and that is why discount is permitted and may be recognised by trade practice. In this case the applicants have borne the expenses of transport. Mr. Tamhane does not suggest that this has any sanction of trade practice behind it. The goods may be sold locally and the goods may be sold inside the State or outside the State and to succeed in his contention Mr. Tamhane must satisfy us that the expenses of transport constitute a cash discount. Realising this difficulty Mr. Tamhane relied upon the definition of the expression "turnover" in Section 2(20) of the Act and he referred to the definition as meaning the aggregate of the amounts of sale price received and receivable by a dealer. He says that the expression "received and receivable" shows that what is material is what a dealer actually receives and not what he hypothetically receives. But Mr. Tamhane overlooks the fact that what a dealer receives or is receivable by him is a sale price and one has to go back again to Section 2(14) to appreciate that it mu3t be a sum allowed as cash discount according to trade practice. As, however, we are unable to accept his argument that the amount of the railway freight constitutes a cash discount according to trade practice, it is not possible to accept his contention that the sale price realised by the applicants is the amount of the price minus the amount of the railway freight paid by them
(3.) THE question then arises how best one can describe the deduction claimed by the applicants. As we take the view that the amount of the railway freight cannot, in law, constitute a cash discount according to trade practice the amount of railway freight paid by the applicants may properly be described as a concession allowed by a dealer to his customers. Now what concession a dealer should allow to his customers is entirely a matter between him and the other party and whatever concession may be allowed by a dealer, it has nothing to do with the assessment which a Sales Tax Authority has to do under the Act. In order to claim a deduction it must fall within the language of the definition as contained in Section 2(14) and if the amount of the railway freight does not fall within the definition of sale price as given in Section 2(14), the applicants are not entitled to say that the amount of the railway freight paid by them should be allowed by way of deduction in the turnover in respect of the assessment made by the Sales Tax Authority. The Sales Tax Authority is not strictly concerned with what passes between a dealer and his customers. He is concerned only with the provisions of law and if a deduction falls within the provisions of law he has to allow it and he is not entitled to allow any other deduction. In substance, this is the view which has prevailed before the authorities below and we would say generally that what is claimed in this case by way of deduction is not really the sale price less any sum allowed as cash discount according to trade practice but merely a concession which the applicants have shown to their customers. In these circumstances we are unable to accept the contention raised by Mr. Tamhane on behalf of the applicants.
This would be enough for a decision in these cases, but if an authority is necessary to support the view which we are taking, it is furnished by a decision given by the Nagpur High Court in the case of Commissioner of Sales Tax, Madhya Pradesh v. Anwarkhan Mahboob Co.  7 S.T.C. 197. With respect, we are in agreement with that view. In the result, therefore, these applications fail and will be dismissed.;
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