Value added tax: If price is reduced.

Effect of reduction of price on Value Added Tax.

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.

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 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.

Refund of tax:

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 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.

[Source: Universal Cylinders Limited vs The Commercial Taxes Officer, decided by SC on 23 February, 2018]

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