SUPREME FOOD INDUSTRIES Vs. STATE OF KERALA

JUDGEMENT

(1.) The connected revision cases are filed by one and the same assessee challenging the orders of the Kerala Value Added Tax Appellate Tribunal confirming the assessment on sale of deep freezers and disallowance of input tax credit claimed under section 11 of the Kerala Value Added Tax Act, 2003 (hereinafter referred to as, "the Act" for short). We have heard learned counsel appearing for the petitioner and learned Government Pleader for the respondent.

(2.) The petitioner is a company engaged in manufacture and sale of ice cream. Distributors were appointed in the State for distribution of ice cream to dealers and consumers. As an incentive the petitioner made bulk purchase of deep freezers and delivered the same to distributors against collection of security deposit almost equal to the value of deep freezers from each of the distributors. In the KVAT assessments for the years 2005-06 and 2008-09, the petitioner claimed that supply of deep freezers to the distributors against collection of security from them does not amount to sale and so much so, the same cannot be treated as sale for the purpose of assessment. The petitioner made an alternate claim for input tax credit, which is the tax paid on the purchase as a credit while determining the petitioner's liability for tax. The first appellate authority as well as the Tribunal rejected both the claims by holding that supply of deep freezers by the petitioner to the distributors is sale of capital goods, which is not entitled to depreciation under section 11(5)(o) of the Act. It is against these orders, the petitioner has come up with these revisions.

(3.) The learned counsel for the petitioner relied on copy of the standard agreement executed between the petitioner and one of the distributors and contended that ownership of deep freezers delivered to the distributors is retained by the petitioner and as and when distribution agreement is terminated, the petitioner will collect back the deep freezers. However it is provided in the agreement and it is conceded in the court that the petitioner will collect charges for the wear and tear, which is 25 per cent of the value at flat rate leading to full recovery of the value of deep freezers in the course of four years.