INDIAN POTASH LTD. Vs. STATE OF KERALA

JUDGEMENT

(1.) The issue involved in all these writ petitions is whether amounts received by the petitioners by way of subsidy from the Central Government on the sale of fertilizers effected by them, can be included in the taxable turnover on which they have to discharge their tax liability under the Kerala Value Added Tax Act [hereinafter referred to as the 'KVAT Act'].

(2.) The petitioners in these writ petitions comprise of both manufacturers and importers of fertilizers, who sell the fertilizers so manufactured/imported by them to consumers within the State. In respect of those fertilizers as are notified under the Fertilizer Control Order, the Central Government fixes the MRP at which the fertilizers can be sold by the petitioners and the petitioners cannot charge a price in excess of the price so fixed by the Central Government when they sell the said fertilizers. To compensate the petitioners for the loss suffered by them, consequent to the requirement of selling the fertilizers only at the prices fixed by the Central Government, the Central Government disburses certain amounts to them by way of subsidy. The computation of this subsidy amount is based on a formula that is stated to be arrived at in the following manner:

(3.) While completing the assessments of the petitioners, under the KVAT Act, for the relevant assessment years, the assessing authorities included the subsidy amounts received by them in their taxable turnover, by relying on the provisions of Explanation VII to Section 2 (lii) of the KVAT, that defines the term "turnover" to include, in cases where a dealer sells any goods purchased by him at a price lower than that at which it was purchased and subsequently receives any amount from any person towards reimbursement of the balance of the price, the amount so received.