M/S. Universal Cylinders Limited v. the Commercial Taxes Officer

DEEPAK GUPTA J. 1. Leave granted. 2. Since a common question of law arises in these appeals, they are being disposed of by this common judgment. Briefly stated the facts are that the appellant-assessee manufactures cylinders for storage of Liquefied Petroleum Gas (LPG). At the relevant time , the entire production was for supply to Government owned companies viz. M/s . Indian Oil Corporation Ltd.(for short ‘the IOC’), M/s Bharat Petroleum Corporation Ltd., and M/s Hindustan Petroleum Corporation Ltd.. It is not disputed that the cost of the cylinders was determined by the Ministry of Petroleum and Natural Gas (for short ‘the MoP & NG’) under the pricing policy. 3. On 04.05.2000, the IOC placed an order for supply of 73380 numbers of 14.2 Kg. LPG cylinders which was to be made by 31.08.2000. Clause 3 of the supply order reads as follows: “You can charge a provisional price of Rs. 682.00 for 14.2 Kg cylinders. Pricing formula is under review by the Government and the final prices applicable after 01.07.99 will be only as per approval of MOP & NG.” 4. The appellant-assessee supplied the cylinders and charged the amount of Rs. 682/- per cylinder and also charged sales tax on the same in accordance with law. Similar supply orders were placed by the other companies also. 5. On 31.10.2000, the IOC sent a letter to the appellant that after review of the prices, the price of 14.2 Kg. cylinders has bee n again provisionally revised to Rs.645/- with effect from 01.07.1999. Relevant portion of the letter reads thus :- 511 “Pending finalization of the report and the short time available to recover the cost due to the proposed cylinder tender, Industr y has decided to revise the provisional basic price of 14.2 Kg cylinder to Rs. 645/- with effect from 01.07.1999. Accordingly we will be recovering the differential amounts from your bills. Final adjustments would be made later on after finalization of the cylinder price.” 6. Thereafter, the oil companies deducted/adjusted the excess payment of Rs.37/- and proportionate sales tax ther eon from the payments due to the assessee. Thereafter the assessee appro ached the Assessing Authority for refund of the sales tax paid on the excess s ale amount i.e. Rs.37/-. The case of the assessee was that he had paid t ax on the provisional price of Rs.682/- per cylinder. After the price had been reduced to Rs.645/-, he was only entitled to Rs.645/-. The oil companies had taken refund of the amount of Rs.37/- and, therefore the tax paid on the excess amount be refunded to him. The assesse e also urged that this amount of Rs.37 should not be counted in its total turnover. 7. The Assessing Officer rejected the claim of the assesse e on the ground that there is no provision under the Act for reduci ng or refunding the amount of tax once the amount of tax has been paid . It was also observed that the arrangement of the assessee w ith the oil companies was in the nature of a private agreement and t he sales tax department had nothing to do with this. The appeals filed by the assessee against the assessment order before the Deputy Commiss ioner of Appeals were partly allowed. Thereafter, the Respond ent-Revenue approached the Tax Board, which allowed the appeals of the Revenue. Being aggrieved, the assessee approached the High Court by filing revision petitions, which were dismissed. Hence, the present appeals. 8. To appreciate the rival contentions of the parties, we may make reference to Section 2(39) of the Rajasthan Sales Tax Act, 1994, which defines ‘sale price’ as under: “2(39) “sale price” means the amount paid or payable to a dealer as consideration for the sale less any sum allowed by way of any kind of discount or rebate according to the practice normally prevailing in the trade, but inclusive of any sum charge d for anything done by the dealer in respect of the goods at the time of or before the delivery thereof.” M/S. UNIVERSAL CYLINDERS LIMITED v. THE COMMERCIAL TAXES OFFICER [DEEPAK GUPTA J.] 9. Reference may also be made to Section 2(44) of the Rajasthan Sales Tax Act, 1994 which defines ‘turnover’ as under: “2(44) “turnover” means the aggregate amount received or receivable by a dealer for sales as referred to in clause (38) including the purchase price of the goods which are subject t o purchase tax under section 11 of the Act; Explanation : Tax charged or collected and shown separately in the sale bill/cash memorandum or in the accounts shall not form part of turnover.” 10. The High Court held that since the words ‘paid’, ‘payable’, ‘amount received’ and ‘or receivable’ have been used in the aforesaid two sections, the assessee was entitled to receive the amount of Rs.682/- per cylinder and if he has given any discount, he cannot claim refund of the same and the price of the cylinder cannot be said to be Rs.645/- per cylinder. The High Court also held that the goods were deliver ed at Rs.682/- per cylinder and this amount was collected and therefor e, no amount should be refunded. 11. We have heard learned counsel for the parties and a numb er of decisions have been cited. 12. In IFB Industries Limited v. State of Kerala 1, the issue was with regard to the definition of ‘turnover’. This court held that to take the benefit of trade discount and to make it eligible for exemption, all that the assessee is required to prove was that the purcha ser had paid only the sum originally charged less the discount and that this should be a regular practice in the trade. 13. Reliance has also been placed on the judgment of the Gujarat High Court in ONGC v. State of Gujarat 2, wherein in similar circumstances, it was held that the discount does not form part of the sale price. A similar view was taken by the Madhya Pradesh High Court in Gail India Ltd . v. State of M.P.3. The facts of this case were that the petitioner company GAIL, a Public Sector Undertaking, was doing business of supply of various petroleum products including LPG. The price of LPG and kerosene was regulated and controlled by the Publ ic Planning and Analysis Cell (PPAC). The assessee supplied LPG to the 1 (2012) 4 SCC 618 2 2014 SCC Online Guj 15385 (Tax Appeal No. 50 of 20 14) 3 (2014) 72, VST 161 513 oil companies on the basis of provisional price and final bill invoice was issued after the price was settled by the PPAC and credit note or debit note was issued. The High Court after referring to the judgment of this Court in IFB Industries Ltd. (supra), held that both the provisional price and the final price are controlled by the PPAC. The change in sale price is due to the direction by the PPAC and is not within the control of the assessee. It held that even though the credit note may have been issued on the basis of the provisional price, the price to be taken into consideration for calculating the turnover and the sale price must be the actual price received by the assessee. 14. Learned counsel for the respondent has relied upon a judgment of this Court in the case of MRF Ltd . v. Collector of Central Excise, Madras 4. We are of the opinion that this judgment has no relevance to this case since it is a judgment arising out of the Excise Act where the tax is attracted the moment the goods are removed from the f actory gate. 15. In our view, a bare reading of Section 2(39) of the Rajasthan Sales Tax 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. 16. In the instant case, 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 asse ssee 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, sinc e 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 4 (1997) 5 SCC 104. M/S. UNIVERSAL CYLINDERS LIMITED v. THE COMMERCIAL TAXES OFFICER [DEEPAK GUPTA J.] is therefore legally entitled to get refund of the tax paid on the excess amount. 17. We may also note that 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 p rovisional price was fixed. We have also taken into consideration the fact that 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 a mount to be fixed by the MoP & NG and that is also the amount which the assessee is legally entitled to receive. 18. In view of the above discussion, we allow the appeals, set aside the judgment of the High Court and direct that the assessee shall be refunded the amount of sales tax paid on the excess amoun t. The order of the Deputy Commissioner is restored. The assesse e 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. 19. Pending applications, if any, shall also stand disposed of. Devika Gujral Ap peals allowed.