JUDGMENT
Jawahar Lal Gupta, J.
1. Are liquidated damages levied for delay in the supply of goods liable to be deducted from the sale price while levying sale tax under the Central Sales Tax Act, 1956? This is the short question that arises for consideration in this case.
2. A few facts may be noticed.
3. The petitioner is a registered dealer. It filed the return for the accounting year 1988-89. It showed a gross turnover of Rs. 19,36,45,633.20 and inter State sales at Rs. 19,18,71,474.50. The Assessing Authority examined the matter. Vide order dated 31st May, 1994 it raised an additional demand of Rs. 1,25,190.00. The petitioner filed an appeal. It was dismissed by the Appellate Authority vide order dated 21st December, 1994. The Sales Tax Tribunal confirmed the order on 29th October, 1996. The petitioner, then, filed an application under Section 22 of the Punjab General Sales Tax Act, 1948 seeking a reference to this court. The application was dismissed vide order dated 23rd August, 1999. Hence this petition under Section 22(2) for a direction to the Sales Tax Tribunal to refer the question to this Court.
4. Notice of motion was issued. A written statement has been filed on behalf of the respondents.
5. Counsel for the parties have been heard.
6. Shri Goyal, learned counsel for the petitioner, contends that the tax is leviable on the actual amount received by the dealer for supply of goods. Any amount deducted or paid on account of delay in supply is liable to be reduced from the settled price while fixing the gross turnover. The claim made on behalf of the petitioner has been controverted by Shri Salil Sagar, appearing for the respondents.
7. Section 2(h) defines ‘sale price’ as “the amount payable to a dealer as consideration for the sale of any goods….” It further provides that any amount allowed as cash discount shall be deducted. Thus, sale price is the amount which is payable to a dealer as consideration for the supply of goods. In the present case, it is the admitted position that the sale price was fixed at Rs. 19,18,71,474.50. It is no doubt true that the rebate, if any, has to be deducted. No rebate was allowed. Damages for delay in supply is not rebate. Consequently, the sale price as agreed upon between the parties was the consideration for the supply of goods. The tax had to be levied on the hypothesis that the gross turnover of the petitioner in respect of inter-State sales was Rs. 19,8,71,474.50.
8. Shri Goyal contends that any deduction made from the price should be taken into account white determining the gross turnover. He places reliance on the decision in The Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Advani Oerlikon (P) Ltd. (1980)45 S.T.C. 32, The State of Tamil Nadu v. Indian Cable Company Ltd., (1990)56 S.T.C. 192 and State of Tamil Nadu v. Alkali and Chemical Corporation of India Ltd., (1994)92 S.T.C. 597.
9. We have examined these judgments. In all these cases, the amount allowed by way of rebate or discount etc. was reduced. In none of these cases, any reduction was allowed on account of the liability of the dealer to pay liquidated damages for delay in supply of goods.
10. Shri Goyal contends that the buyer had levied liquidated damages amounting to Rs. 15,35,758/-. Thus, the sale price should have been reduced to that extent. We are unable to accept this contention.
11. An extract from the contract between the parties has been produced on record. In para 12.2, it has been provided as under:-
“12.2 Should the tenderer fail to deliver the equipment or any consignment thereof within the period prescribed for delivery the Director General DOT shall be entitled to recover 1/2% of the entire value of the contract for each week of delay or part thereof, subject to a maximum of 5% of the value of the contract.”
11. A perusal of the above shows that the buyer was entitled to recover liquidated damages for delay in delivery of the goods. In other words, the dealer was liable to pay the liquidated damages at the agreed rate if it failed to supply the goods within the agreed time. The liquidated damages were in the nature of an expenditure which the dealer had to incur for its default. This was not a discount as contemplated under Section 2(h). The damages in the very nature of things are meant to compensate the party for the loss it suffers on account of the default of the supplier. It has no connection with the sale price agreed upon between the parties.
12. No other point has been raised.
13. In view of the above, we find that the view taken by the Tribunal is legal and
reasonable. No question of law arises which may require a reference by the Tribunal.
The petition is, accordingly, dismissed. No costs.