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TMI Blog2017 (2) TMI 1021X X X X Extracts X X X X X X X X Extracts X X X X ..... e often allowed subsequently by way of credit notes and not at the time of raising the tax invoice. According to the petitioner, the turnover discount, target discount, additional discount, special discount etc are allowable deductions from sale price or purchase price as the case may be provided the value of goods paid by buyer is the amount less such discount. 3. The assessing authority had issued notice under 25(1) of the VAT Act observing that the sales turnover of goods is below the cost of purchase. Accordingly, assessments were finalised for the years 2009-10 and 2010-11. Petitioner filed WP(C) Nos. 27088/2014 and 34773/2015 before this Court. Writ petitions were allowed as per common judgment dated 2/12/2015. The matter was remitted back. According to the petitioner, further notices were issued for the very same years as Exts.P3 and P3(a). Petitioner filed reply stating that the proposal is against the specific guidelines prescribed by this Court. It was contended that the measure of tax prescribed under KVAT Act is on aggregate amount for which goods are sold. Tax can be levied only based on law stated in the statute and not on accounting principles. Exts.P5 and P5(a) are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g reliance upon the judgment in Cement House v. State of Kerala [2010 (1) 8 KTR 329 (Ker)] observed that in so far as the assessee sold the goods at a lower price than the purchase price, Explanation VII to Section 2(lii) of the KVAT Act is applicable in the case. Further the assessee had received discount subsequently which will form part of the taxable turnover. 7. The learned Government Pleader places reliance upon two judgments of this Court in State of Kerala v. Syed Muhammed (2016 (4) KLT 462) and Tenny Devassy v. State of Kerala decided on 13/7/2015 in O.T.Revision No.98/2012 wherein it has been held that any reimbursement of price received by a dealer is liable to be included in his turnover whereas the discount allowed to the customer and shown separately is liable to be excluded. It was held that the amount received by the assessee towards reimbursement of the balance price, though called reimbursement of discount, is a payment in reimbursement of balance of the price attracting Explanation VII to section 2(lii). In Syed Muhammed (supra), after relying upon Cement House (supra), it is held by this Court at paras 10, 14 and 15 as under:- "10. In the case at hand, even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he main part of the condition in the Explanation that the sale is at below the purchase price stands established and therefore the contention of the petitioner is rejected. For attracting the above provision, a dealer should subsequent to the sale receive any amount from any person towards reimbursement of the balance of the price. Even though senior counsel appearing for the petitioner contended that the amount received by the petitioner in the form of credit notes is not balance of the price for the goods sold by the petitioner, the authorities below gave a clear finding that the credit notes received is for the goods sold by the petitioner which were purchased from the same manufacturer who issued the credit notes. xxxx xxxx xxx." 15. The finding of the authorities that the assessee would suffer loss if the discounts are not taken into account remains uncontroverted and is virtually admitted and we see no reason to disturb any such finding of facts, especially in a revision of this nature. This fact having been established beyond doubt, the Assessing officer and the First appellate authority were justified and right in applying the provisions of Explanation VII to S.2(lii) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le price of the product in the hands of the petitioners, and determine the output tax paid by the petitioners. If, thereafter, it is found that the output tax paid by the petitioner is less than the input tax that he has taken credit of, then the appropriate course of action would be to direct the petitioners to restrict the input tax credit to the extent provided in the second proviso to Section 11(3) of the KVAT Act. 10. Secondly, if the discount amounts received by the petitioners from their suppliers, can be demonstrated to be amounts received by them towards balance of the sale price of the goods, then the sales turnover of the petitioners can be enhanced to that extent alone and the output tax payable by the petitioner computed accordingly. Against this output tax found to be payable by the petitioners, the input tax availed by them would have to be set off to the extent possible. In this event, the assessing authorities would be acting in accordance with Explanation VII to Section 2 (lii) to determine the output tax payable by the petitioner on the enhanced sales turn over. 11. Thirdly, if it is found that the petitioners' sale price in respect of the product, is les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be disallowed where it is found that the dealer has claimed input tax credit under this section on such turnover or of such goods used in the manufacture of goods sent outside. An amendment has been brought to the above proviso by the Finance Act, 2008, w.e.f. 1/04/2005 indicating that the amount covered under credit notes issued by a supplier that do not affect the input tax credit already availed of, or on account of reimbursement of any expenses incurred by the dealer shall not be reckoned for the purpose of assessment under the Act. The question would be whether the amendment brought to the 5th proviso to Section 11(3) has the effect of not including the credit notes issued by a supplier to the total turnover. Prior to amendment, there was no ambiguity to the above provision in so far as it was made clear that input tax credit shall not be available in respect of tax paid on the turnover subsequently allowed as discount. But it is relevant to note that though the statute had incorporated an amendment to proviso to Section 11(3) as per Finance Act, 2008, it has not touched on the issue regarding the turnover to be considered as far as the liability to pay tax is concerned. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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