VETTATHIL AGENCIES Vs. COMMERCIAL TAX OFFICER

JUDGEMENT

(1.) The petitioners, in this batch of cases, are second dealers of cement, electrical goods etc. in the State. The goods sold by the petitioners are taxable under the KVAT Act. While paying tax on sales turnover, petitioners have taken input tax credit collected by the suppliers. The suppliers, periodically, give credit notes to the petitioners by way of incentives for sale of various goods under various schemes. The Assessing Officers, in all the cases, considered the amount covered by the credit notes as discount given by the suppliers and, consequently, while giving input tax credit, tax attributable to the credit note amount was reduced, thereby reducing the input tax credit claimed by the petitioners based on purchase bills. The input tax credits on credit note amounts were reduced because petitioners have not complied with circular No. 41101 dated 18/09/2007 issued by the Commissioner of Commercial Taxes, produced as Ext.P2 in WP(C) No. 9806/2008. According to the petitioners, the requirement of circular among other things is that, the recipients of credit should produce certificate from the suppliers to the effect that the suppliers have not claimed any deduction of the credit note amount towards discount or otherwise in their turnover, or in other words, tax stands paid on full amount shown in bills issued and thereafter no deduction is claimed based on credit notes issued. This requirement introduced orders to the extent of reduction of input tax credit on the credit note amount is also under challenge for the reason that it is wrongly disallowed. Learned Government Pleader pointed out that reduction in input tax on credit note amounts is made only because of non-compliance of the circular by the petitioners.

(2.) I have heard various counsel appearing for the petitioners and learned Government Pleader appearing for the respondents.

(3.) In order to appreciate the contention, the relevant provision, which provide for deduction of discount in the determination of taxable turn over, has to be referred. Therefore, the said provision is extracted hereunder.