SOUTHERN MOTORS Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The appellant has filed these writ appeals challenging the order passed by the learned Single Judge dated 20-7-2012 who has held that in terms of the proviso to Rule 3(2)(c) of the Karnataka Value Added Tax Rules, 2005 (for short, hereinafter referred to as 'the Rules'), until and unless the discounts are shown in the tax invoice, the assessee is not entitled to any relief and therefore, he declined to interfere with the rectification orders passed by the Assessing Officer in accordance with Rule 3(2)(c) of the Rules. The appellant-assessee is a dealer in motor vehicles and registered under the provisions of Karnataka Value Added Tax Act, 2003 (for short, hereinafter referred to as 'the Act'). It is his case that in view of the stiff competition in the market, the assessee has been following the policy of offering discounts to its customers on the motor vehicles sold by it. But, due to the policy of manufacturers of the vehicles that their motor vehicles should be sold at the same prices to all the purchasers and also as per the practice in the trade, the assessee do not show the discount in its tax invoices but issues credit notes towards the same separately, so that the net amount payable by the purchaser is what is agreed upon with him at the time of sale i.e. invoice price less discount.

(2.) Section 30 of the Act, which was deleted from 1-4-2012, provides for issuance of credit notes for discount which results in automatic reduction in the amount stated in the tax invoice and which in turn would result in lower amount of turnover and lower amount of tax. However, as per the proviso to Rule 3(2)(c), for claiming deduction for discount from the total turnover, discount has to be shown in the tax invoice. In the case of State of Karnataka v. Reliance Industries Limited, Bangalore,2010 68 KarLJ 337(HC) (DB), a Division Bench of this Court has held that there is no conflict between Rule 3(2)(c), on one hand, as per which discount has to be mentioned in the tax invoice and Section 30 and Rule 31, on the other hand, which provide for issuance of credit note for discount which results in automatic deduction in the amount stated in the tax invoice and which in turn would result in lower amount of turnover and lower amount of tax. Relying upon the said judgment, the assessee claimed for deduction of discount given by issuing credit notes. By following the decision of this Court in the case of State of Karnataka v. Reliance Industries Limited, Bangalore,2010 68 KarLJ 602 (HC) (DB), the same was allowed by the Assessing Authority for the tax periods 2007-2008 and 2008-2009.

(3.) The 3rd respondent subsequently, vide order dated 21-5-2012 under Section 41(1) of the Act has rectified the said reassessment orders by disallowing the discount given by way of credit notes by relying on the later decision rendered by another Division Bench of this Court in the case of State of Karnataka v. Kitchen Appliances India Limited, Bangalore,2011 71 KarLJ 234(HC) (DB), wherein it is held that no deduction on discount can be claimed if it is not shown in the tax invoice in view of the proviso under Rule 3(2)(c) of the Rules. Aggrieved by the said rectification order, the assessee preferred writ petitions before this Court. The learned Single Judge dismissed the said writ petitions upholding the rectification order. It is against this order, the present writ appeals are filed.