Quantity discount and turnover under KVAT: clarificatory circular confined turnover to actual consideration received.

Quantity discount allowed as a trade discount under the KVAT framework is treated as a sale for statutory purposes, but it does not automatically form part of the dealer's turnover merely because it is deemed a sale. The Commissioner's clarificatory circular, read with its illustration, was said to confine turnover to the consideration actually received and to bind the assessing officer. On that reasoning, inclusion of the quantity discount in turnover was unsustainable, and the assessment orders rejecting the circular could not stand.

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Issues: Whether quantity discount allowed in relation to a sale could be included in the dealer's turnover under Section 7 of the KVAT Act, and whether the assessment orders rejecting the circular issued by the Commissioner were sustainable.

Analysis: Section 7 deems the quantity allowed as trade discount or incentive in terms of goods to be a sale by the dealer, but it does not state that such discount automatically forms part of the dealer's turnover. The Commissioner's circular, read with the illustration, clarified that the turnover is confined to the consideration actually received, and the assessing authority was bound to follow that clarification. In the facts of the case, the same assessing authority had later accepted the circular in respect of earlier years, and no further reconsideration of the issue was required.

Conclusion: The inclusion of the quantity discount in turnover was unsustainable, and the assessment orders were liable to be set aside in favour of the assessee.

Ratio Decidendi: A quantity discount allowed under the relevant trade-discount provision is deemed to be a sale, but it does not, by that reason alone, become part of the dealer's turnover; a clarificatory circular issued by the tax authority can govern the assessment and bind the assessing officer.

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