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2022 (5) TMI 1300 - KERALA HIGH COURTInterpretation of statute - Levy of VAT - credit note received subsequent to the date of the invoice - Determination of Turnover - Input Tax Credit - Large Bench Decision - construction of Explanation VII to Section 2(lii) and the Fifth proviso to Section 11(3) of the Act - Whether the bar on assessment set out in the fifth proviso to Section 11(3) of KVAT Act 2003 would preclude operation of the extended definition of turnover provided under Explanation VII to Section 2(lii) of KVAT Act? HELD THAT:- On perusal of entire records, following summary is arrived at: (a) The definition of the word ‘turnover’ in Section 2(lii) is applicable unless the context otherwise demands. (b) The deemed turnover subject to satisfying a condition stipulated in Explanation VII could arise if the context in which the demand allows such definition to operate. (c) The Legislature incorporated the second limb to the Fifth proviso to Section 11(3) and by such amendment, the Legislature has taken out from the purview of assessment, credit notes received subsequent to invoice and payment of tax by the manufacturer/supplier and not claiming refund or adjustment of input tax. (d) In cases in which tax is paid at the time of invoice, and no adjustment of input tax is claimed by the manufacturer or the supplier, then, even if the dealer sells it at a lesser price and claims input credit proportionate to the sales price, and subsequently receives credit note from manufacturer/supplier, such credit notes, discount, loss on recoupment is not included for assessment, subject to manufacturer/supplier not claiming refund or adjustment of input tax already deposited. In other words, the credit notes not affecting input tax already deposited cannot be treated as taxable turnover by the extended meaning of Section 2 subsection (lii) Explanation VII of the Kerala Value Added Tax Act. (e) In the scheme of value addition and payment of tax on such value addition, the levy of tax is justified on value addition, but, without value addition, sale, or purchase, and for the amount retained by the dealer value-added tax is demanded contrary to Section 11(3) Fifth proviso of the Act. The matters are directed to be placed before the Single Bench.
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