M/S IFB INDUSTRIES LTD. versus STATE OF KERALA

Citation: [2012] 4 S.C.R. 802 · Decided: 27-02-2012 · Supreme Court of India · Bench: AFTAB ALAM · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
(2012] 4 S.C.R. 802 
MIS IFB INDUSTRIES LTD. 
v. 
STATE OF KERALA 
(Civil Appeal Nos. 2516-2517 of 2012) 
FEBRUARY 27, 2012 
[AFTAB ALAM AND ANIL R. DAVE, JJ.] 
Sa/es Tax - Kera/a General Sales Tax Rules, 1963- r.9(a) 
- Trade discount - Eligibility for exemption - Held: Exemption 
C is allowable subject to two conditions; first, the discount is 
given in accordance with the regular practice in the trade and 
secondly, the accounts should show that the purchaser had 
paid only the sum originally charged less the discount -
Nothing in rule 9(a) to read it in the restrictive manner to mean 
D that a discount in order to qualify for exemption under its 
provision must be shown in the invoice itself - Kera/a General 
Sales Tax Act, 1963 - s.2(xxvii). 
How far deductions are allowable under rule 9(a) of 
E the Kerala General Sales Tax Rules, 1963 for trade 
discounts is the question which arose for consideration 
in the present appeal. 
The High Court had held that unless the discount was 
shown in the invoice itself, it would not qualify for 
F deduction and further that any discount that was given 
by means of credit note issued subsequent to the sale 
of the article was in reality an incentive and not trade 
discount eligible for exemption under rule 9(a) of the 
Rules. 
G 
H 
Allowing the appeals, the Court 
HELD: 1.1. In order to clearly understand the kinds 
of discount that are exempted in terms of rule 9(a) one 
802 
IFB INDUSTRIES LTD. v. STATE OF KERALA 
803 
may usefully refer to the definition of 'turnover' under A 
Section 2(xxvii) of the Kerala General Sales Tax Act, 1963. 
The main body of the definition is followed by several 
explanations. It is seen that the very definition of 
"turnover" recognises discounts other than cash 
discount and provides that those other discounts too like 
B 
the cash discount shall not be included in the turnover. 
[Paras 23, 24] [811-E-F; 812-C] 
1.2. Significantly, Rule 9(a) does not speak of 
invoices but stipulates that the discount must be shown 
in the accounts. On a plain reading of the provision it is 
C 
clear that the exemption is allowable subject to two 
conditions; first, the discount is given in accordance with 
the regular practice in the trade and secondly, the 
accounts should show that the purchaser had paid only 
the sum originally charged less the discount. There is D 
nothing in rule 9(a) to read it in the restrictive manner to 
mean that a discount in order to qualify for exemption 
under its provision must be shown in the invoice itself. 
[Para 26] [812-F-H] 
E 
Deputy Commissioner of Sales Tax (Law) Board of 
Revenue (Taxes) v. Mis Advani Oorlikon (P) Ltd., (1980) 1 
SCC 360 : 1980 (1) SCR 931; Deputy Commissioner of 
Sales Tax(Law) Board of Revenue (Taxes), Ernaku/am v. 
Motor Industries Co, Ernaku/am, (1983) 2 SCC 108 : 1983 
F 
(2) SCR 384 and Union of India and Others v. Bombay Tyres 
International (P) Ltd., (2005) 3 SCC 787 - relied on. 
Godavari Fertilizers and Chemicals Ltd. v. Commissioner 
of Commercial Taxes, (2004) 138 STC 133 and Ka/pana 
Lamps and Components Ltd. v. State of Kera/a, (2006) 143 
G 
STC 666 - approved. 
3. The cases of the appellants for the respective 
assessment periods are remitted to the Assessing 
Authority with a direction to make assessments and pass 
H 
804 
SUPREME COURT REPORTS 
[2012] 4 S.C.R. 
A fresh orders in accordance with law and in light of this 
judgment. The Assessing Authority shall not reject the 
appellants' claim for exemption of the amounts of trade 
discount solely on the ground that the discount amounts 
were not shown in the sale invoices. [Para 34] [818-0-F] 
B 
Case Law Reference: 
1980 (1) SCR 931 
relied on 
Para 29 
1983 (2) SCR 384 
relied on 
Para 30 
c 
(2005) 3 sec 787 
relied on 
Para 31 
(2004) 138 STC 133 
approved 
Para 32 
(2006) 143 STC 666 
approved 
Para 33 
D 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 
2516-2517 of 2012 etc. 
From the Judgment & Order dated 26.06.2009 of the High 
Court of Kerala at Ernakulam in Sales Tax Revision No. 396 
of 2008 and dated 15.06.2010 in Review Petition No. 148 of 
E 2010. 
WITH 
C.A. Nos. 2521-2522 of 2012. 
A.K. Ganguly, R. Venkataramani, Ritin Rai, V.K. Monga, 
F 
K. Sreekumar, V. Vijaya Lakshmi, P.V. Dinesh, Aljo K. Joseph, 
T.P. Sindhu for the Appellant. 
G 
V. Giri, M.T. George, Mohammed Sadique T.A., Kavitha 
K.T. for the Respondent. 
The Judgment of the Court was delivered by 
AFTAB ALAM, J. 1. Leave granted in both the Specia
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