STATE OF KARNATAKA Vs. KITCHEN APPLIANCES INDIA LIMITED

JUDGEMENT

(1.) These appeals are by the Revenue being aggrieved by the order of the Tribunal in partly allowing the appeals of the assessee thereby setting aside the order of the assessing authority and the first appellate authority. The assessee is a registered dealer under the Kamataka Value Added Tax Act, 2003 engaged in the manufacturing and trading of domestic appliances, such as, colour television, DVD, audio music systems, air cooler and air conditioners, washing machines, mixers and grinders, micro ovens, water purifiers, kitchen appliances, toaster, iron box, spares, etc. On December 4, 2006, the Deputy Commissioner visited the assessee's premises for auditing the books of accounts. On verification of the books of accounts for the period April, 2006 to October, 2006, it was found that the assessee had issued credit notes to the customers on monthly sales performance basis incentives, subsequent to the issue of tax invoices. In the said credit notes, the assessee had deducted the output tax portion related to the discount and remitted the balance tax to the Department. The Revenue proposed to levy tax on the discount amount given to the dealers on the ground that rule 3(2) (c) of the Karnataka Value Added Tax Rules, 2005 makes it mandatory on the dealer to claim the discount separately on the tax invoice and the tax collected should be on the sale price less discount and there is no provisions to claim the discounts, which are allowed in future dates as per the trade practices followed. Accordingly, the assessee submitted his reply. Reply to the proposition notice was rejected. The assessing authority confirmed the proposition notice. Aggrieved by the same, the assessee preferred an appeal before the Joint Commissioner of Commercial Taxes (Appeals) 2, Bangalore. The appellate authority dismissed all the seven appeals. Aggrieved by the same, the assessee preferred an appeal before the Karnataka Appellate Tribunal, Bangalore, wherein by the impugned order, the appeals were partly allowed and the impugned levy of tax was directed to be deleted along with interest. Aggrieved by the same, the present appeals are filed by the State.

(2.) Smt. Sujatha, the learned Government Advocate, contends that the impugned order is bad in law and liable to be set aside. She contends that the tax as demanded in terms of rule 3(2)(c) is just and proper and therefore, the finding of the Tribunal is erroneous. She contends that the Tribunal lost sight of the fact that the provisions of rule 3(2)(c) were held to be constitutionally valid. However, the Tribunal has misdirected itself in assuming jurisdiction to decide the applicability and the validity of the rule 3(2)(c) notwithstanding the clear finding recorded by the honourable High Court. She further contends that the discount as pleaded by the assessee is not a discount.

(3.) On the other hand, Sri Sarangan, the learned senior counsel appearing on behalf of the respondent's counsel, defends the impugned order. He contends that there is no error committed by the Tribunal that calls for any interference. He submits that even though the constitutional validity of rule 3(2)(c) was upheld by the learned single judge, when the same was challenged in the writ appeal, the matter was remanded for fresh consideration and hence, it cannot be said that the validity of rule 3(2)(c) has been upheld. He contends that rule 3(2)(c) is ultra vires the Constitution of India. That the Tribunal having appreciated the facts and circumstances of the case has rightly held in favour of the assessee by deleting the tax demanded. That the records would disclose that the credit notes have been issued in terms of section 30 of the KVAT Act. He accordingly pleads that there is no error committed by the Tribunal that calls for any interference and hence, the appeal is liable to be dismissed.