PRIYA AGENCIES Vs. COMMERCIAL TAX OFFICER A A

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 Kerala Value Added Tax Act, 2003. While paying tax on sales turnover, the 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. 41/07 dated September 18, 2007 issued by the Commissioner of Commercial Taxes, produced as exhibit P2 in W. P. (C) No. 9806 of 2008. According to the petitioners, the requirement of circular, among other things, is that, the recipients of credit notes 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 the full amount shown in bills issued and thereafter no deduction is claimed based on credit notes issued. This requirement introduced in the circular is under challenge by the petitioners. The assessment 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 with the circular by the petitioners.

(2.) I have heard various counsel appearing for the petitioners and learned Government Pleader appearing for the respondents. In order to appreciate the contention, the relevant provision, which provides for deduction of discount in the determination of taxable turnover, has to be referred. Therefore, the said provision is extracted hereunder:

(3.) From the above, it is clear that discount to be allowed as deduction in the turnover is only trade discount, which is shown separately in the invoice, whereunder the purchaser pays for the goods, only the amount, reduced by discount, shown in the bill. In other words, under the above provision, discount given through credit notes, periodically, will not be entitled to any deduction from the turnover. Consequently, the suppliers from whom petitioners purchase the goods are not entitled to any deduction of credit note amount in the determination of their taxable turnover either as discount or otherwise and, so much so, the tax charged in the bills raised by them would have been or should have been paid by them entitling the petitioners for credit of full input tax in their assessment based on purchase bills.