2016 (2) TMI 1053 - HC - VAT and Sales Tax

Court grants petitioner's claim for customer discount deductions via credit notes under VAT rules

The court allowed the petitioner's claim for entitlement to deductions for discounts allowed to customers via credit notes. The court found that the ... Deduction of discounts - The petitioner claims that it is a dealer in cars and is entitled to deduction of discounts allowed to customers in the sale price of cars after the cars were sold by issuing credit notes - reliance was placed by the petitioner in the case of Pratham Motors Pvt. Ltd. v. Additional Commissioner of Commercial Taxes [2012 (9) TMI 907 - KARNATAKA HIGH COURT], where the issue was Whether it is permissible for the assessee to show the discount given by a separate credit note subsequently and claim deduction even though the said discount is not shown in the tax invoice or sale bill and it was held that Ratio laid down in Southern Motors' case [2008 (7) TMI 862 - KARNATAKA HIGH COURT] does not prohibit the issuance of credit note subsequent to the sale bill. It is held that such modification in the sale bill is permitted if it is done within six months from the date of sale transaction - Held that: - Interpreting rule 31 of the KVAT Rules, this court held that a dealer was entitled to give further discount even after the sale has been completed provided the discounts are customary practice in the trade or otherwise known as trade discount and that the onus of proving the said fact was on the assessee and he ought to demonstrate that the discount given was in accordance with the provisions of the Act and Rules - the referred case by petitioner is squarely applicable to the present case - the petitioner has made out a case - petition allowed - decided in favor of petitioner. Issues Involved:1. Entitlement to deduction of discounts allowed to customers via credit notes.2. Compliance with Rule 31 of the Karnataka Value Added Tax Rules, 2005.3. Interpretation of Section 30 of the Karnataka Value Added Tax Act, 2003.4. Applicability of previous judgments on similar issues.Detailed Analysis:1. Entitlement to Deduction of Discounts Allowed to Customers via Credit Notes:The petitioner, a car dealer, claims entitlement to deduction of discounts allowed to customers in the sale price of cars by issuing credit notes, as authorized by Rule 31 of the Karnataka Value Added Tax Rules, 2005 (KVAT Rules) read with Section 30 of the Karnataka Value Added Tax Act, 2003 (KVAT Act). The petitioner argues that the decision in Pratham Motors Pvt. Ltd. v. Additional Commissioner of Commercial Taxes applies to their case, and thus, the reassessment orders disallowing the claims are liable to be set aside.2. Compliance with Rule 31 of the Karnataka Value Added Tax Rules, 2005:Rule 31 specifies the particulars that must be included in credit and debit notes issued by registered dealers. The petitioner contends that they have complied with these requirements, making them eligible for deductions. The court referenced previous judgments, including State of Karnataka v. Reliance Industries Ltd., which clarified that there is no conflict between Rule 3(2)(c) and Rule 31. The issuance of credit notes results in a lower turnover, thereby reducing the sales tax payable.3. Interpretation of Section 30 of the Karnataka Value Added Tax Act, 2003:Section 30 of the KVAT Act outlines the conditions under which credit and debit notes can be issued and declared in tax returns. The petitioner argues that their actions are in line with this section, as they have issued credit notes within the stipulated period and declared them in their returns. The court noted that Section 30 was omitted only from April 1, 2012, and does not affect the claims for the tax periods 2006-07 and 2007-08.4. Applicability of Previous Judgments on Similar Issues:The petitioner relied on several judgments, including State of Karnataka v. MIRC Electronics Limited, Pratham Motors Pvt. Ltd. v. Additional Commissioner of Commercial Taxes, and S. B. Audio and Video v. Additional Commissioner of Commercial Taxes. These cases supported the petitioner's claim that discounts allowed via credit notes, even if not shown on the original tax invoices, are eligible for deduction. The court also referenced the judgment in IFB Industries Limited, which emphasized the binding nature of unchallenged tribunal orders.Conclusion:The court concluded that the petitioner has made out a case, allowing the petition in terms as prayed for. The court's decision was influenced by the consistent interpretation of Rule 31 and Section 30 in previous judgments, which supported the petitioner's entitlement to deductions for discounts allowed via credit notes. The respondent-State's opposition, based on the judgment in Southern Motors, was not sufficient to override the petitioner's claims.