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Universal Cylinders Limited Vs. The Commercial Taxes Officer - (Supreme Court) (23 Feb 2018)

Any sum by way of any discount or rebate shall be deducted and shall not be included in sale price


Sales Tax/VAT

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. Indian Oil Corporation Ltd. ('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 ('the MoP & NG') under the pricing policy.

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. On 31st October, 2000, the IOC sent a letter to the Appellant that after review of the prices, the price of 14.2 Kg. cylinders has been again provisionally revised to Rs. 645/- with effect from 01st July, 1999. Thereafter, the oil companies deducted/adjusted the excess payment of Rs. 37/- and proportionate sales tax thereon from the payments due to the Assessee. Thereafter the Assessee approached the Assessing Authority for refund of the sales tax paid on the excess sale amount i.e. Rs. 37/-. The case of the Assessee was that he had paid tax 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 High Court held that, 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 delivered at Rs. 682/- per cylinder and this amount was collected and therefore, no amount should be refunded.

Section 2(39) of the Rajasthan Sales Tax Act, 1994 defines "sale price" indicating 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.

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 1st July, 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.

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. Judgment of the High Court is set aside and the Assessee shall be refunded the amount of sales tax paid on the excess amount. The order of the Deputy Commissioner 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.


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