Judgment

Pankaj Mithal, CJ.-All the above Sales Tax References are concerning the same parties, M/s. MRF Limited but for different accounting years, i.e., 1995-1996, 1996-97, 1998-1999, 1999-2000, 2000-2001, 2001-2002 respectively.

2. Since in all of them, the facts are identical and they give rise to the same legal proposition, we with the consent of the parties considered it convenient to take them up together.

3. We have heard Sh. Pranav Kohli, senior counsel assisted by Sh. Arun Dev Singh, learned counsel for the assessee and Sh. D.C. Raina, Advocate General assisted by Sh. K.D.S.Kotwal, learned counsel for the respondents.

4. The assessee is a company engaged in manufacturing of tyres, tubes, flaps, tread rubber etc. and sell its products across the county through various sale depots including one at Jammu. In the course of selling its products, the assessee allows 1% discount to its dealers as per pre-determined agreement and the entitlement of such discount to the dealer is duly indicated on each invoice. The discount so allowed uniformly to all dealers without any condition of achieving a particular target, is credited to the accounts of the respective dealers at the end of each quarter.

5. In respect to the relevant accounting years, the assessing authority passed assessment orders disallowing exclusion of discount from the turnover of sales of the assessee on the ground that the discount was not deducted from the invoice amount and since it is being adjusted later on, it was in the nature of bonus or incentive to the dealers.

6. The assessee preferred appeals against the assessment orders before the Deputy Commissioner of Sale Tax (Appeals), Jammu. The appeals were dismissed by a common order again on the ground that the discount was not deducted from the invoices and, as such, it is not liable to be excluded from the turnover.

7. The assessee not satisfied by the appellate orders, preferred further appeals to the Jammu and Kashmir Sales Tax (Appellate Tribunal), Jammu but the same were also dismissed on the same lines. The Assessee, therefore, demanded a reference under Section 12-D of the J&K General Sales Tax Act, 1962 (hereinafter refer to as ‘the Act) to the High Court on the ground that the matter involves substantial question of law as to whether discount granted to the dealers on purchase of the products manufactured by the assessee is deductable from the gross turnover for the purposes of levy of tax upon the assessee. The Tribunal vide order dated 28.01.2010 refused reference to the High Court.

8. It is in this background that the assessee has preferred these references contending that the refusal on part of the Tribunal to refer the matter to the High Court is illegal and that the references involve substantial questions of law, which may be considered and answered by the Court.

9. At the very beginning of the hearing, on the facts as narrated by either of the sides, we are satisfied that these references do involve the following substantial question of law :-

“Whether the Tribunal is justified in disallowing the discount from the taxable turnover of the assessee on the ground that it was not actually deducted from the sale bill/voucher and, as such, does not fulfil the conditions of Rule 19 (a) (i) of the Rules.”

10. We have made known the above question of law to the parties and as they agreed to address us on the aforesaid question with their consent, we had proceeded to hear them on its merits.

11. The submission of Sh. Kohli is that in view of the definition of turnover contained in Section 2 (n) of the Act read with Rule 19 of the J&K General Sales Tax Rules, 1962 (hereinafter referred to as ‘the Rules’), the taxable turnover of an assessee is liable to be determined after allowing certain deductions which include discount on the sales/purchases.

12. Sh. Raina in defence submits that the assessee does not qualify for any deduction of discount on the sales as the discount allowed was not deducted in t