Judgment

VENKATARAMIAH, J.:- In this appeal by special leave arising under the Kerala General Sales Tax Act, 1963 (hereinafter referred to as the Act) two questions arise for consideration. They are (i) whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in law in holding that the assessee was entitled to exemption under R. 9 (a) of the Kerala General Sales Tax Rules, 1963 (hereinafter referred to as the Rules) from payment of sales tax on the turnover relating to service discount and (ii) whether the value of goods returned by the purchasers could be deducted under R. 9 (b) (i) of the Rules from the total turnover of the year of assessment in which the goods were actually returned when they had been sold in the previous assessment year.

2. The assessee M/s. Motor Industries Co., Ernakulam is a dealer in diesel, fuel injection parts etc. For the assessment year 1973-74 ending March 31, 1974 the assessment had been completed under the Act on the best judgment basis determining the taxable turnover at Rs. 47,42,687.71 by disallowing the claim for exemption of an amount of Rs. 69,707.68 which the assessee had claimed as service discount under Rule 9 (a) of the Rules and a further amount of Rs. 982.83 under R. 9 (b) (i) of the Rules being the value of goods returned. The Assistant Commissioner of Sales Tax (Assessment) who was the assessing authority disallowed the claim in respect of service discount on the ground that the amount in respect of which deduction was claimed had not been allowed as a discount in accordance with the terms of sale but had been allowed as an overriding commission and incentive to promote trade. He disallowed the claim in respect of the value of goods which had been returned on the ground that it related to the sales completed in the previous assessment year i. e. 1972-73. Aggrieved by the order of assessment the assessee filed an appeal before the Deputy Commissioner, Agricultural Income-tax and Sales Tax (Appeal), Ernakulam. In that appeal, the exemption claimed in respect of service discount was allowed. But the claim in respect of sales returns was allowed to the extent of the turnover of Rs. 552.70 being the turnover of goods returned within a period of three months from the date of sale. The appeal filed against that order by the Department before the Appellate Tribunal was dismissed. Against the order of the Tribunal the Department filed a revision petition before the High Court of Kerala which again was dismissed by its judgment dated June 11, 1981. This appeal is preferred with the special leave of this Court against the aforesaid judgment of the High Court.

3. Under Chap. II of the Act which contains the charging provisions the incidence and levy of tax is on the turnover of any dealer during any assessment year computed in accordance with the Act. Explanation (2) (ii) given in S. 2 (xxvii) of the Act which defines the expression turnover says that subject to such conditions and restrictions, if any, as may be prescribed in that behalf any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover.

4. Clause (a) and sub-clause (i) of Cl. (b) of R. 9 of the Rules which prescribes the method of computation of the taxable turnover of an assessee read thus :

"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 of the dealer or is in accordance with the terms of a contract or agreement entered into in a particular case and provided also that the accounts show that the purchaser has paid only the sum originally charged less the discount;

(b) (i) all amounts allowed to