Judgment:
C.N. Ramachandran Nair, J.
1. The question raised in the connected revisions filed by the petitioner for the assessment years 2001-02 and 2002-03 is whether the Tribunal was justified in not considering the petitioner's claim for deduction of discount in the determination of taxable turnover. We have heard counsel appearing for the petitioner and Government Pleader appearing for the respondent.
2. On going through the order of the Tribunal we notice that the Tribunal did not consider the claim because according to the Tribunal the assessing officer allowed the claim while determining the taxable turnover. However, the Tribunal has specifically stated that the amount claimed is scheme discount, allowability of which is not considered by the Tribunal at all. The Government Pleader produced copies of returns filed by the petitioner which does not disclose any trade discount claimed as exempt by the petitioner. According to him scheme discount is not entitled to any deduction under Rule 9(a) of the Kerala General Sales Tax Rules, 1963. Counsel for the petitioner contended that the assessing officer in fact has made a statement in the assessment order that discount is allowed. However, in the computation portion he deducted the amount after adding the same amount! We notice that none of the authorities below has considered the nature of discount claimed by the petitioner in the revised return filed and it's eligibility for deduction. Rule 9(a), relevant for the assessment years in question, is as follows:
9. Determination of taxable turnover.-In determining the taxable turnover, the amounts specified in the following clauses, shall subject to the conditions specified therein, be deducted from the total turnover of the dealer,:(a) all amounts allowed as discount, provided that such discount is allowed in accordance with the regular practice in the trade and provided also that the accounts show that the purchaser has paid only the sum originally charged less the discount...
3. It is clear from the above provision that what is allowable as discount in the computation of taxable turnover is the trade discount given in the bills. What is insisted in the rule is that the purchaser has paid the price charged less the discount. This certainly means that original invoice discount should be shown and tax should be charged only on the net amount exclusive of discount so that the buyer gets the deduction towards discount. The petitioner is a manufacturer engaged in supply of goods in wholesale to distributors and dealers. Sales are therefore first sales and discount if any given can only be trade margin to dealers. If tax is not to be charged on the dealer margin, then discount should be given in the invoice itself. If the petitioner has made sales in this way, then necessarily deduction should have been claimed in the monthly return itself as the taxable turnover does not cover discount/trade margin given in the invoice. On the other hand, in the Tribunal's order, what is referred to is scheme discount which is nothing but incentives given by manufacturers, and wholesalers to dealers, may be for seasonal sales or may be for annual sales. Such incentives are normally given by credit note at the end of the season or at the end of the year. These incentives given through credit notes are outside the scope of discount covered by Rule 9(a) of the KGST Rules.
4. Since facts are not considered by the assessing officer with reference to monthly returns and annual returns filed and copies of bills raised by the petitioner and credit notes issued, we feel an opportunity can be given to the petitioner to demonstrate before the assessing officer that discount given is of the kind allowable under Rule 9(a) as discussed above.
5. We therefore set aside the orders of the Tribunal and that of the lower authorities pertaining to disallowance of discount alone and remand the matter to the assessing officer for verification of records and for allowing the claim to the extent permissible under law stated above.