JUDGMENT

W.P.No.13424 of 2023 etc.
batch
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved On 24.08.2023
Pronounced On 10.01.2024
CORAM
THE HON'BLE MR.JUSTICE C.SARAVANAN
W.P.Nos.13424, 13427, 13429, 13433 and 13435 of 2023

and
W.M.P.Nos.13098, 13099, 13102, 13103, 13104, 13105, 13110, 13111,
13112 and 13114 of 2023
In all W.Ps.
M/s.Supreme Paradise ... Petitioner
Versus
Assistant Commissioner (ST)

North 1 Circle,
Tirupur. ... Respondent
Prayer in W.P.No.13424 of 2023:Writ Petition filed under Article 226 of

the Constitution of India, for issuance of a Writ of Certiorari calling for
the records of the Respondent leading to issuance of impugned order
dated 09.03.2023 (vide GSTN.No.33AAVFS9545H1Z1/2017-18).
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https://www.mhc.tn.gov.in/judis
Page No.1 of 29
W.P.No.13424 of 2023 etc.batch




In all WPs.
For Petitioner : Mr.S.Sathyanarayanan

for M/s.KMC Arunmokan
For Respondents : Ms.Amirtha Poonkodi Dinakaran
Government Advocate.
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Page No.2 of 29
COMMON ORDER
By this common order, all the five Writ Petitions are being
disposed.
2. In all these writ petitions, the writ petitioners have challenged
the impugned assessment year for the following years:
S.No. W.P.Nos. Assessment Tax Demanded Penalties imposed Interest

Years
1. 13424 of 2023 2017-18 Rs.72,52,140/- Rs.72,52,140/- Rs.57,76,330/-
2. 13427 of 2023 2018-19 Rs.2,97,17,504/- Rs.2,97,17,504/- Rs.1,82,161,406/-
3. 13429 of 2023 2019-20 Rs.1,19,63,236/- Rs.1,19,63,236/- Rs.51,50,486/-
4. 13433 of 2023 2020-21 Rs.1,39,81,594/- Rs.1,39,81,594/- Rs.34,81,416/-
5. 13435 of 2023 2021-22 Rs.1,86,16,384/- Rs.Rs.1,86,16,384/ Rs.12,37,988/-
-
3. All the impugned orders read identically save that the amounts
have demanded in the respective assessment years are different and are
based on the information gathered before passing of the respective
impugned orders for the respective assessment years.
4. For the sake of clarity, relevant portion of the impugned order
passed for the assessment year 2018-19 is reproduced below:-
“The wordings of Section 15(3)(b)(i) very clearly

states that if the quantum of discount is given after the
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Page No.3 of 29
supply of foods has taken place, it has to be given as per

the terms of such agreement i.e., it cannot be open
ended/not based on any criteria. Thus this quantum of
discount cannot be arrived without any basis, only at the
discretion of the supplier. The supplier has to clearly
mention the quantum of discount or percentage of
discount which is to be worked out on the basis of
certain parameters or certain criteria which may be
agreed to between the supplier and the recipient and
which are predetermined and mentioned in agreement in
respect of supply of the goods. Thus, the bare word
'discount' if left open ended or without any
quantifications or criteria attached can mean there can
be any percentage of discount ranging from bare
minimum to even 100% as per discretion of supplier and
certainly such abnormal discounts without any criteria
or basis in no way be considered as fair and no taxation
statute can be construed to be having open ended
discount.”
5. The petitioner is engaged in retail sale of mobile phones. The
department had issued notices to the petitioner in DRC-01 for the
respective Assessment Years on 16.12.2022 followed by a reminder dated
01.01.2023, 16.02.2023 and 03.03.2023.
6. The petitioner had given a reply on 06.02.2023 and submitted to
the Office of the respondent on 14.02.2023. Thereafter, a personal
hearing, was held, pursuant to which the impugned orders have been
passed by the respondent, confirming the proposals contained in the
DRC-01.
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7. In the impugned orders, it has been concluded that discount on
the value of supply can be allowed only in the cases specified in Section
15(3)(a) and (b) of the respective GST enactments. It has been concluded
in the impugned orders that the wordings of Section 15(3)(b) of the
respective GST enactments clearly state that value of supply shall not
include any discount, which is given after the supply has been effected, if-
(i) such discount is established in terms of an

agreement entered into at or before the time of such supply
and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount

on the basis of document issued by the supplier has been
reversed by the recipient of the supply.
8. Mr.S.Sathyanarayanan, learned Counsel for the petitioner
submits that Section 15 of CGST Act, 2017 / TNGST Act, 2017 states that
amongst the non-related parties, the transactional value shall be the value
on which GST is levied. GST is levied and paid on the entire invoice
amount, which includes volume discount. As amount of volume discount
is already part of the transactional value as reflected in the invoice and
GST is computed on such transactional value, the volume discount cannot
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Page No.5 of 29
be added to the invoice value and levy GST thereon. Doing so, would be
taxing the same amount twice and the Respondent has no jurisdiction to
tax the same amount again.
9. It is therefore submitted that the Respondent has erred in levying
GST on volume discount amount once again under the pretext that its
inclusion is covered u/s 15(2) of the CGST Act, 2017/ TNGST Act, 2017.
10. It is therefore, submitted that Section 15(3) of CGST Act, 2017
/ TNGST Act, 2017 provides that the discount which do not qualify the
conditions stated therein cannot be deducted in arriving at the
transactional value. The Petitioner has not deducted the volume discount
amount from the invoice value while arriving at the transactional value for
GST levy purposes. It is further submitted that the invoice value (without
deduction of the volume discount amount) including the GST is paid to
the Vendor supplier. Hence, it is submitted that the Petitioner need not
pay any further tax on the volume discount amount as stated by the
Respondent. Therefore, the impugned order is erroneous and has to be
quashed.
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11. It is submitted that the Respondent failed to appreciate the
prevalent business practice where the manufacturer would direct the
dealer to sell the mobile phones at a discounted price for a particular
season and that such discount cannot be construed as subsidy as
contemplated u/s. 15(2)€ of TNGST Act, 2017.
12. It is submitted that the Respondent failed to appreciate that
there shall be no specific criteria, basis or rationale for arriving at discount
for a particular mobile phone and it shall purely be depend on the market
conditions and the same shall not be contemplated at the time of supply.
13. It is submitted that the Respondent failed to appreciate that it is
prevalent trade practice where manufacturer would issue credit note to the
dealer at the time of discount season to protect the dealer from sustaining
losses if the goods supplied already does not get sold.
14. It is submitted that the Respondent failed to appreciate the fact
that the credit note shall be issued by the manufacturer to the dealer only
after the supply and not at the time of supply.
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Page No.7 of 29
15. It is submitted that the contentions raised by the Petitioner in
their reply dated 06.02.2023 and 07.03.2023 were ignored by the
Respondent only on the ground that the Petitioner had not had produced
any agreement showing the discount granted by the manufacturer. This is
purely a non-appreciation of prevalent trade practice.
16. It is submitted that the Respondent wrongly construed the
incentive given by the manufacturer to the Petitioner for achieving the
sales target as consideration as per S. 2(31)(b) of the CGST Act, 2017/
TNGST Act, 2017.
17. It is submitted that the Respondent failed to appreciate that as
per S. 34(2) of the CGST Act, 2017/TNGST Act, 2017 it is duty of the
person who issues credit note to declare such credit note in the monthly
return or before 30th of November of following the end of financial year.
Hence, the manufacturer/distributor of the mobile were duty bound to file
their returns in respect of credit notes and not the Petitioner herein.
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18. It is submitted that the Respondent failed to consider the
decision rendered by the Hon'ble Apex Court in the case of Eicher Tractor
vs CC (2000) 122 ELT 321 wherein it was categorically held that
discount is a commercially acceptable measure and no criteria is required
for arriving at a particular discount rate.
19. It is submitted that the Respondent failed to consider the
decision rendered by the Hon'ble Supreme Court in the case of Southern
Motors vs. State of Karnataka (2017) 98 VST 207 wherein it was held
that insisting the quantification of trade discount for deduction at the time
of sale itself, by incorporating the same in the tax invoice/bill of sale
would be to demand the impossible for all practical purposes and thus
would be illogical. Further the Court had held that transaction allowing
discount has to be proved on the basis of contemporaneous records. The
relevant portion of the judgement is extracted below:
"On an overall review of the scheme of the Act and

the Rules and the underlying objectives in particular of
Sections 29 and 30 of the Act and Rule3 of the Rules, we
are of the considered opinion that the requirement of
reference of the discount in the tax invoice or bill of sale
to qualify it for deduction has to be construed in relation
to the transaction resulting in the final sale/purchase
price and not limited to the original sale sans the trade
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Page No.9 of 29
discount. However, the transactions allowing discount

have to be proved on the basis of contemporaneous
records and the final sale price after deducting the trade
discount must mandatorily be reflected in the accounts
as stipulated under Rule 3(2)(c) of the Rules. The
sale/purchase price has to be adjudged on a combined
consideration of the tax invoice or bill of sale as the case
may be along with the accounts reflecting the trade
discount and the actual price paid. The first proviso has
thus to be so read down, as above, to be in consonance
with the true intendment of the legislature and to achieve
as well the avowed objective of correct determination of
the taxable turnover. The contrary interpretation
accorded by the High Court being in defiance of logic
and the established axioms of interpretation of statutes
is thus unacceptable and is negated. The appeals are
thus allowed in the above terms. No costs.”
20. It is submitted that the Judgement rendered by the Hon'ble
Apex Court in Southern Motors case is reiterated by the Apex Court in the
case of Maya Appliances (P). Ltd. vs Additional Commissioner of CT
(2018) 53 GSTR 49.
21. The Respondent had failed to consider the decision rendered
by the Mumbai Bench of Tribunal in the case of Sharyu Motors vs
Commissioner of Service Tax (2016) 43 STR 158 and Delhi Bench of
Tribunal in the case of T.M. Motors Pvt. Ltd vs. CGSTC & CE (2018) 58
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Page No.10 of 29
GSTR 176 wherein it was held that the discounts/incentives received from
manufacturer are not liable to be service taxed and cannot be treated as
Business Auxiliary Service.
22. The Respondent failed to consider the decision rendered by this
Hon’ble Court in the case Kun Motor Company Pvt. Ltd. Us Assistant
Commissioner (CT) 2020 SCC OnLine Mad 28128 wherein it was held
that the trade discount offered by the manufacturer to the dealer does not
in any manner enhance the taxable value of the motor cars sold by the
dealer to the retail buyer at showroom, thereby the same cannot be added
to the taxable turnover of the dealer. The relevant portion of the
judgement is extracted below:
“11.I have considered the impugned order and the

notices pursuant to which the impugned order came to
be passed. There is no dispute that the petitioner is a
dealer in motor cars and had received trade discount
from the manufacturer from whom it had purchased the
cars for retail sales at its show rooms. The trade
discount which has been offered by the dealer is an
incentive given by the manufacturer based on the
performance of the petitioner in the retail market. The
trade discount offered by the manufacturer to the
petitioner does not in any manner enhance the taxable
value of the motor cars sold by the petitioner to the
retail buyer at its show rooms. I therefore find that there
is no basis on which the aforesaid amount of Rs.
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Page No.11 of 29
3,48,08,441 can be taxed as taxable turnover of the

petitioner. The two transactions are independent
transactions. One transaction is between the
manufacturer who is also a dealer who had passed on
incentives to the petitioner and the second transaction
between the petitioner and its buyers of its retail show
room to whom the petitioner has sold the cars. As these
two are independent transactions there is no basis on
which the trade discount passed to it by the
manufacturer (dealer) to the petitioner can be added
into the taxable turnover of the petitioner for the
purpose of assessment under the TNVAT Act 2006.”
23. Therefore, in any event the Impugned Order passed by the
Respondent is unsustainable under law and is liable to quashed.
24. Mr.S.Sathyanarayanan, learned counsel for the petitioner
would further submit that the issue is squarely covered by a decision of
this Court in Kun Motor Company Private Limited, Represented by its
Accounts Manager Vs. The Assistant Commissioner (CT) 2020 SCC
Online Mad 28128 rendered on 20.01.2020 in the context of Tamil Nadu
Value Added Tax Act (TNVAT) Act, 2006.
25. The respondent has not filed the counter. However, the case
was argued as the dispute does not pertain to any disputed question of
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Page No.12 of 29
facts and dispute pertained to only interpretation of the provisions of the
respective GST enactments.
26. Defending the impugned order, Ms.Amirtha Poonkodi
Dinakaran, learned Government Advocate for the respondent on the other
hand submits that the petitioner has an alternate remedy before the
Appellate Commissioner and therefore, the petitioner has to workout the
remedy only before the Appellate Commissioner under Section 107 of the
CGST/SGST Act on merits
27. It is submitted that these writ petitions are not maintainable as
the petitioner has alternate remedy under Section 107 of the respective
GST enactments that has been also mentioned in the preamble to the
respective orders.
28. The learned Government Advocate has placed reliance on the
clarification issued by the Central Board of Indirect Taxes and Customs
dated 07.03.2019 bearing Ref.F.No.20/16/04/2018-GST in Circular
No.92/11/2019-GST.
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29. The learned Government Advocate has further drawn attention
of this Court to Clause-C of the clarification, which pertains to discount
including 'Buy more, save more' offers:
“C. Discounts including “Buy more, save more”

offers:
(i). Sometimes, the supplier offers staggered

discount to his customers (increase in discount rate with
increase in purchase volume). For example-Get 10%
discount for purchases above Rs.5000/-, 20% discount
for purchases above Rs.10,000/- and 30% discount for
purchases above Rs.20,000/-. Such discounts are shown
on the invoice itself.
(ii). Some suppliers also offer periodic/year

ending discounts to their stockists, etc., For example-Get
additional discount of 1% if you purchases 10000 pieces
in a year, get additional discount of 2% if you purchase
15000 pieces in a year. Such discounts are established in
terms of an agreement entered into at or before the time
of supply though not shown on the invoice as the actual
quantum of such discounts gets determined after the
supply has been effected and generally at the year end.
In commercial parlance, such discounts are colloquially
referred to as “volume discounts”. Such discounts are
passed on by the supplier through credit notes.
(iii). It is clarified that discounts offered by the

suppliers to customers (including staggered discount
under 'Buy more, save more' scheme and post
supply/volume discounts established before or at the
time of supply) shall be excluded to determine the value
of supply provided they satisfy the parameters laid down
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in sub-section (3) of Section 15 of the said Act, including

the reversal of ITC by the recipient of the supply as is
attributable to the discount on the basis of document(s)
issued by the supplier.
(iv). It is further clarified that the supplier shall be

entitled to avail the ITC for such inputs, input services
and capital goods used in relation to the supply of goods
or services or both on such discounts.”
30. It is therefore, submitted that these writ petitions are not
maintainable as the petitioner has alternate remedy under Section 107 of
the respective GST enactments that has been also mentioned in the
preamble to the respective orders.
31. I have heard both Mr.S.Sathyanarayanan, learned Counsel for
the petitioner and Ms.Amirtha Poonkodi Dinakaran, learned Government
Advocate. I have also perused all the documents and affidavits filed in
support of these writ petitions.
32. I have also perused the impugned orders and clarifications
issued by the Central Board of Indirect Taxes and Customs. Although the
Court exercising its jurisdiction under Article 226 of the Constitution,
Section 7 of the TNGST Act, 2017 would ordinarily refrain from
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Page No.15 of 29
entertaining a writ petition against an assessment order, where the
petitioner has an effective and an alternate remedy, the Court is of the
view that this is a fit case for entertaining this writ petition.
33. This Court is of the view that the impugned orders are liable to
be quashed and the cases deserve to be remitted back to pass a de-novo
order in the light of the observation contained herein.
34. Earlier clarification in Circular No.92/11/2019-GST dated
07.03.2015 was issued by Central Board of Indirect Taxes and Customs.
Thereafter, clarification was issued vide circular No.92/11/2018-GST
dated 07/03/2019 by Central Board of Indirect Taxes and Customs. It was
clarified that Discounts including 'Buy more, save more'. In Para C and D
of circular No.92/11/2019-GST dated 07.03.2019 it was clarified as
follows:
“C. Discounts including ‘Buy more, save more’ offers:
i. Sometimes, the supplier offers staggered discount to his

customers (increase in discount rate with increase in purchase
volume). For example- Get 10 % discount for purchases above Rs.
5000/-, 20% discount for purchases above Rs. 10,000/- and 30%
discount for purchases above Rs. 20,000/-. Such discounts are
shown on the invoice itself.
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ii. Some suppliers also offer periodic / year ending discounts

to their stockists, etc. For example- Get additional discount of 1% if
you purchase 10000 pieces in a year, get additional discount of 2%
if you purchase 15000 pieces in a year. Such discounts are
established in terms of an agreement entered into at or before the
time of supply though not shown on the invoice as the actual
quantum of such discounts gets determined after the supply has
been effected and generally at the year end. In commercial
parlance, such discounts are colloquially referred to as “volume
discounts”. Such discounts are passed on by the supplier through
credit notes.
iii. It is clarified that discounts offered by the suppliers to

customers (including staggered discount under „Buy more, save
more" scheme and post supply / volume discounts established before
or at the time of supply) shall be excluded to determine the value of
supply provided they satisfy the parameters laid down in sub-section
(3) of section 15 of the said Act, including the reversal of ITC by the
recipient of the supply as is attributable to the discount on the basis
of document (s) issued by the supplier.
iv. It is further clarified that the supplier shall be entitled to

avail the ITC for such inputs, input services and capital goods used
in relation to the supply of goods or services or both on such
discounts.
D. Secondary Discounts
i. These are the discounts which are not known at the time of
supply or are offered after the supply is already over. For example,
M/s A supplies 10000 packets of biscuits to M/s B at Rs. 10/- per
packet. Afterwards M/s A re-values it at Rs. 9/- per packet.
Subsequently, M/s A issues credit note to M/s B for Rs. 1/- per
packet.
ii. The provisions of sub-section (1) of section 34 of the said

Act provides as under: “Where one or more tax invoices have been
issued for supply of any goods or services or both and the taxable
value or tax charged in that tax invoice is found to exceed the
taxable value or tax payable in respect of such supply, or where the
goods supplied are returned by the recipient, or where goods or
services or both supplied are found to be deficient, the registered
person, who has supplied such goods or services or both, may issue
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to the recipient one or more credit notes for supplies made in a

financial year containing such particulars as may be prescribed.”
iii. Representations have been received from the trade and

industry that whether credit notes(s) under sub-section (1) of section
34 of the said Act can be issued in such cases even if the conditions
laid down in clause (b) of sub-section (3) of section 15 of the said
Act are not satisfied. It is hereby clarified that financial /
commercial credit note(s) can be issued by the supplier even if the
conditions mentioned in clause (b) of sub-section (3) of section 15 of
the said Act are not satisfied. In other words, credit note(s) can be
issued as a commercial transaction between the two contracting
parties.
iv. It is further clarified that such secondary discounts shall

not be excluded while determining the value of supply as such
discounts are not known at the time of supply and the conditions
laid down in clause (b) of sub-section (3) of section 15 of the said
Act are not satisfied.
v. In other words, value of supply shall not include any

discount by way of issuance of credit note(s) as explained above in
para 2 (D)(iii) or by any other means, except in cases where the
provisions contained in clause (b) of sub-section (3) of section 15 of
the said Act are satisfied.
vi. There is no impact on availability or otherwise of ITC in

the hands of supplier in this case.”
35. A fresh clarification was issued on 28.06.2019 in Circular
No.105/24/2019-GST. In para Nos.3 to 7 of it was clarified as follows:
“3. It is clarified that if the post-sale discount is given by the

supplier of goods to the dealer without any further obligation or
action required at the dealer’s end, then the post sales discount
given by the said supplier will be related to the original supply of
goods and it would not be included in the value of supply, in the
hands of supplier of goods, subject to the fulfilment of provisions of
sub-section (3) of section 15 of the CGST Act. However, if the
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Page No.18 of 29
additional discount given by the supplier of goods to the dealer is

the post-sale incentive requiring the dealer to do some act like
undertaking special sales drive, advertisement campaign, exhibition
etc., then such transaction would be a separate transaction and the
additional discount will be the consideration for undertaking such
activity and therefore would be in relation to supply of service by
dealer to the supplier of goods. The dealer, being supplier of
services, would be required to charge applicable GST on the value
of such additional discount and the supplier of goods, being
recipient of services, will be eligible to claim input tax credit
(hereinafter referred to as the “ITC”) of the GST so charged by the
dealer.
4. It is further clarified that if the additional discount is

given by the supplier of goods to the dealer to offer a special
reduced price by the dealer to the customer to augment the sales
volume, then such additional discount would represent the
consideration flowing from the supplier of goods to the dealer for
the supply made by dealer to the customer. This additional discount
as consideration, payable by any person (supplier of goods in this
case) would be liable to be added to the consideration payable by
the customer, for the purpose of arriving value of supply, in the
hands of the dealer, under section 15 of the CGST Act. The
customer, if registered, would be eligible to claim ITC of the tax
charged by the dealer only to the extent of the tax paid by the said
customer to the dealer in view of second proviso to sub-section (2)
of section 16 of the CGST Act.
5. There may be cases where post-sales discount granted by

the supplier of goods is not permitted to be excluded from the value
of supply in the hands of the said supplier not being in accordance
with the provisions contained in sub-section (3) of section 15 of
CGST Act. It has already been clarified vide Circular No.
92/11/2019-GST dated 7th March, 2019 that the supplier of goods
can issue financial / commercial credit notes in such cases but he
will not be eligible to reduce his original tax liability. Doubts have
been raised as to whether the dealer will be eligible to take ITC of
the original amount of tax paid by the supplier of goods or only to
the extent of tax payable on value net of amount for which such
financial / commercial credit notes have been received by him. It is
clarified that the dealer will not be required to reverse ITC
attributable to the tax already paid on such post-sale discount
received by him through issuance of financial / commercial credit
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Page No.19 of 29
notes by the supplier of goods in view of the provisions contained in

second proviso to sub-rule (1) of rule 37 of the CGST Rules read
with second proviso to sub-section (2) of section 16 of the CGST Act
as long as the dealer pays the value of the supply as reduced after
adjusting the amount of post-sale discount in terms of financial /
commercial credit notes received by him from the supplier of goods
plus the amount of original tax charged by the supplier.
6. It is requested that suitable trade notices may be issued to

publicize the contents of this circular.
7. Difficulty if any, in the implementation of this Circular

may be brought to the notice of the Board. Hindi version will follow.
36. Both the clarifications are not relevant to the facts of the
present case either in support of the present writ petition or in favour of
the respondent to dismiss the writ petition. They are not in any event
binding on this Court in terms of the decision of the Collector of Central
Excise Vs. Dhiren Chemical Industries (2004) 6 SCC 722. The Hon'ble
Supreme Court held that clarification of the Board are not binding on the
Courts though they may bind the Assessing Officers and field formations.
37. Under the scheme of the respective GST Enactments, 2017
each instance of supply of goods or services are chargeable to tax under
Section 9. The expression “supply” has been defined in Section 7 if the
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Page No.20 of 29
respective GST Enactments, 2017.
38. Section 7 of the TNGST Act, 2017 reads as follows:
“7. (1) For the purposes of this Act, the expression

-supply includes—
(a) all forms of supply of goods or services or both
such as sale, transfer, barter, exchange, license, rental, lease
or disposal made or agreed to be made for a consideration
by a person in the course or furtherance of business;
(b) import of services for a consideration whether or
not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or
agreed to be made without a consideration;
(d) 3 [Omitted]
(1A) -Where certain activities or transactions,
constitute a supply in accordance with the provisions of sub-
section (1), they shall be treated either as supply of goods or
supply of services as referred to in Schedule II.;
(2) Notwithstanding anything contained in sub-section
(1),—
(a) activities or transactions specified in Schedule III;
or
(b) such activities or transactions undertaken by the
Central Government, a State Government or any local
authority in which they are engaged as public authorities, as
may be notified by the Government on the recommendations
of the Council,
shall be treated neither as a supply of goods nor a
supply of services.
(3) Subject to the provisions of 1 [sub-sections (1),
(1A) and (2)], the Government may, on the recommendations
of the Council, specify, by notification, the transactions that
are to be treated as—
(a) a supply of goods and not as a supply of services;
or
(b) a supply of services and not as a supply of goods.”
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39. The petitioner herein who is a taxpayer has been assigned to
the State Jurisdiction for the purpose of assessment.
40. Section 15 of the respective GST enactments, 2017 prescribes
a mechanism for “valuation”. The value of a supply of goods or services
or both shall be the transaction value. Transaction Value is the price
actually paid or payable for the said supply of goods or services or both
where the supplier and the recipient of the supply are not related and the
price is the sole consideration for the supply. Sections 15 (2) and 15 (3)
of the respective GST Enactments, 2017 indicate what can form part of
supply and when the value of the supply shall not include any discount.
41. Sections 15(2) and 15(3) of TNGST Act, 2017 which are
relevant and extracted below:
Section 15 (2) (e) TNGST Act, Section 15 (3) TNGST Act, 2017
2017
The value of supply shall include— (3) The value of the supply shall not in-
clude any discount which is given—
........
(a) before or at the time of the supply if
........
such discount has been duly recorded in
........ the invoice issued in respect of such sup-
........ ply; and
(e) Subsidies directly linked to (b) after the supply has been effected, if
—
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Page No.22 of 29
Section 15 (2) (e) TNGST Act, Section 15 (3) TNGST Act, 2017
2017
the price excluding subsidies pro- (i) such discount is established in terms of
vided by the Central Government an agreement entered into at or before the
and State Governments. time of such supply and specifically linked
to relevant invoices; and
(ii) input tax credit as is attributable to the
discount on the basis of document issued
by the supplier has been reversed by the
recipient of the supply.
42. As far as the petitioner is concerned, it is the “transaction
value” that is relevant for payment of tax on the supplies effected by the
petitioner.
43. As per Section 15(1) of the respective GST Enactments, the
“transaction value” is the price actually paid or payable for the supply of
the goods or services or both were the supplier and the recipient of the
supply are not related and the prices the sole consideration for the supply.
44. Where, the supplier offers discounts to buyer/recipient, such
discount cannot form part of the “transaction value” of the buyer/recipient
on further supply to his client or customer as the case may be.
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Page No.23 of 29
45. Section 15(2)(e) of the respective GST Enactments will come
into play only when a part of the consideration payable for the supply by
respondent is subsidised by a 3rd party other than the Central Government
or the State Government. The subsidy will get embedded into the
“transaction value” only if the subsidy is disguised as a discount.
46. A further sale or supply of goods or services by the recipient of
such goods or services at a discounted price cannot form part of the
“transaction value” of such recipient/seller, unless such discount was on
account of the subsidy for such supply given by a 3rd party and was
disguised as a discount.
47. If the value of supply is subsidised by a 3 rd party, the
transaction value of the supply will include the value of such subsidy.
Only if the price is subsidised by the Central Government or the State
Government, the value of supply will not include such subsidy. If a
discount offered on a supply is also directly linked to subsidy by a 3rd
party, the value of such subsidy will be includible in the “transaction
___________
Page No.24 of 29
value” of the supply.
48. A discount by itself will not qualify as subsidy. However, a
discount offered by a distributor or a supplier or the manufacturer to
buyer/recipient simplicitor cannot form part of the “transaction value”
unless such a discount is offered on account of the subsidy for such
supplies by a 3rd party. In other words, a discount linked to the subsidy
alone can form part of the “transaction value”.
49. Section 15(3)(b) of the respective GST Enactments is relevant
only for determining the “transaction value” of the supplier where after
the supply is affected and discount is offered to a recipient.
50. Suppose after the supply was affected to the petitioner and
discount was offered based on the scheme, the supplier would have been
entitled to state that the discount offered to the petitioner cannot form part
of the “transaction value” provided the conditions stipulated therein are
satisfied namely:-
(i) Such discount is established in terms of an

agreement entered into at or before the time of supply and
___________
Page No.25 of 29
was specifically linked to the relevant invoice;
(ii) Input tax credit attributable to the discount on

the basis of the document issued by the supplier namely
the petitioners manufacturer or distributor as the case may
be, is reversed by the recipient of the supply like the
petitioner.
51. Thus, the discount offered to the petitioner can impact only the
“transaction value” of the supplier of the petitioner. As far as the
“transaction value” of the petitioner is concerned, it is the price which has
been paid or actually payable for the supply of the goods.
52. There is no scope for confusing the discount offered to the
petitioner and the discounted price at which the petitioner effects further
sale to its customers. They are two independent transactions and there is
no scope for intermingling them for demanding tax from the petitioner.
The discounted price at which the petitioner sells the goods is relevant
only for determining the “transaction value” adopted by the petitioner.
53. Unless, the discounted price itself was on account of the
subsidy as a result of which while the supplier would have been
compensated without including into the “transaction value” in the invoice,
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Page No.26 of 29
question of adding such value to the transaction value of the petitioner
cannot be countenanced.
54. Therefore, the impugned orders are quashed and the cases are
remitted back to the respondent. The respondent is directed to pass order
on merits in accordance with law, within a period of three (3) months
from the date of receipt of copy of this order. Such order shall be passed
in accordance with procedure that were going at the time when notice was
issued.
55. These writ petitions are allowed with the above observations.
There shall be no order as to costs. Connected miscellaneous petitions are
closed.
10.01.2024
Index : Yes/No
Speaking Order : Yes/No
Neutral Citations : Yes/No
nst
___________
Page No.27 of 29
To
Assistant Commissioner (ST)
North 1 Circle,
Tirupur.
___________
Page No.28 of 29
C.SARAVANAN, J.
nst
Pre-Delivery Common Order made

in
W.P.Nos.13424, 13427, 13429, 134332 and 13435 of 2023
10.01.2024
___________
Page No.29 of 29

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W.P.No.13424 of 2023 etc.

IN THE HIGH COURT OF JUDICATURE AT MADRAS

THE HON'BLE MR.JUSTICE C.SARAVANAN

W.P.Nos.13424, 13427, 13429, 13433 and 13435 of 2023

M/s.Supreme Paradise ... Petitioner

Assistant Commissioner (ST)

Prayer in W.P.No.13424 of 2023:Writ Petition filed under Article 226 of

Prayer in W.P.No.13427 of 2023:Writ Petition filed under Article 226 of

Prayer in W.P.No.13429 of 2023:Writ Petition filed under Article 226 of

Prayer in W.P.No.13433 of 2023:Writ Petition filed under Article 226 of

Prayer in W.P.No.13435 of 2023:Writ Petition filed under Article 226 of

For Petitioner : Mr.S.Sathyanarayanan

2. In all these writ petitions, the writ petitioners have challenged

the impugned assessment year for the following years:

S.No. W.P.Nos. Assessment Tax Demanded Penalties imposed Interest

based on the information gathered before passing of the respective

impugned orders for the respective assessment years.

4. For the sake of clarity, relevant portion of the impugned order

passed for the assessment year 2018-19 is reproduced below:-

“The wordings of Section 15(3)(b)(i) very clearly

supply of foods has taken place, it has to be given as per

5. The petitioner is engaged in retail sale of mobile phones. The

department had issued notices to the petitioner in DRC-01 for the

respective Assessment Years on 16.12.2022 followed by a reminder dated

01.01.2023, 16.02.2023 and 03.03.2023.

6. The petitioner had given a reply on 06.02.2023 and submitted to

the Office of the respondent on 14.02.2023. Thereafter, a personal

passed by the respondent, confirming the proposals contained in the

7. In the impugned orders, it has been concluded that discount on

in the impugned orders that the wordings of Section 15(3)(b) of the

(i) such discount is established in terms of an

(ii) input tax credit as is attributable to the discount

8. Mr.S.Sathyanarayanan, learned Counsel for the petitioner

amount, which includes volume discount. As amount of volume discount

is already part of the transactional value as reflected in the invoice and

GST is computed on such transactional value, the volume discount cannot

tax the same amount again.

9. It is therefore submitted that the Respondent has erred in levying

10. It is therefore, submitted that Section 15(3) of CGST Act, 2017

conditions stated therein cannot be deducted in arriving at the

deduction of the volume discount amount) including the GST is paid to

Respondent. Therefore, the impugned order is erroneous and has to be

11. It is submitted that the Respondent failed to appreciate the

prevalent business practice where the manufacturer would direct the

dealer to sell the mobile phones at a discounted price for a particular

season and that such discount cannot be construed as subsidy as

contemplated u/s. 15(2)€ of TNGST Act, 2017.

12. It is submitted that the Respondent failed to appreciate that

there shall be no specific criteria, basis or rationale for arriving at discount

13. It is submitted that the Respondent failed to appreciate that it is

losses if the goods supplied already does not get sold.

14. It is submitted that the Respondent failed to appreciate the fact

after the supply and not at the time of supply.

15. It is submitted that the contentions raised by the Petitioner in

their reply dated 06.02.2023 and 07.03.2023 were ignored by the

any agreement showing the discount granted by the manufacturer. This is

purely a non-appreciation of prevalent trade practice.

16. It is submitted that the Respondent wrongly construed the

incentive given by the manufacturer to the Petitioner for achieving the

sales target as consideration as per S. 2(31)(b) of the CGST Act, 2017/