STATE OF KARNATAKA Vs. RELIANCE INDUSTRIES LTD.

JUDGEMENT

(1.) This revision petition has been filed by the State challenging the order dated February 12, 2008 passed in S.T.A. No. 413 of 2007 by the Karnataka Appellate Tribunal, Bangalore. The relevant facts of the case are that the respondent assessee is engaged in the business of trading in polyester yarn and other, such materials and is a dealer under the provisions of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as, "the Act") and the Central Sales Tax Act, 1956. For the period from April 2006 to September 2006 respondent filed monthly returns under the provisions of section 35(1) of the Act read with rule 38 of the Karnataka Value Added Tax Rules, 2005 (hereinafter referred to as, "the Rules"). Claiming deduction in the total turnover declared in the monthly returns filed towards discount allowed to its purchasers which has resulted in reduction of taxable turnover relating to goods sold during the said months. The respondent had issued invoices for the sales effected during the said period and had charged sales tax for goods at the rate of four per cent under the Act separately.

(2.) According to the respondent, incentive scheme was extended to its purchasers to encourage them to purchase higher quantities of goods and make payments towards the goods purchased for which respondent had issued credit notes in every month and allowed certain discount to its buyers subsequent to tax invoices already issued under the provisions of section 29 of the Act and Rules made thereunder. On account of the said scheme of incentives and the issuance of credit notes and by way of trade discounts which has resulted in reduced taxable turnover relating to the goods sold for particular months for which respondent had claimed reduction in the amount of tax from the total turnover of the said months.

(3.) For the tax period April 2006 the respondent had declared total turnover including the exempted sales and has claimed deduction of Rs. 52,24,775 (including tax at four per cent) towards discount of taxable goods which has resulted in corresponding reduction in the taxable turnover and consequently on the tax liability of Rs. 2,08,991. The assessing authority however disallowed such discounts and levied tax by order dated January 29, 2007. An application for rectification of the said order was also rejected by the assessing authority by endorsement dated February 23, 2007. Aggrieved by the assessment order, the respondent had preferred an appeal before the first appellate authority which by its order dated May 20, 2007, dismissed the appeal and confirmed the order of the appellate authority. Being aggrieved by the said order, the matter was carried to the Tribunal in S.T.A No. 410 of 2007 which was pleased to allow the appeal and the amount of trade discount on the strength of the credit notes issued subsequent to the issue of tax invoices was allowed and a direction was given to issue revised demand notice. The said order is under challenge in this revision petition.