TaxTMI 
TaxTMI 
2015 (3) TMI 433
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....in view of the stiff competition in the market, the assessee has been following the policy of offering discounts to its customers on the motor vehicles sold by it. But, due to the policy of manufacturers of the vehicles that their motor vehicles should be sold at the same prices to all the purchasers and also as per the practice in the trade, the assessee do not show the discount in its tax invoices but issues credit notes towards the same separately, so that the net amount payable by the purchaser is what is agreed upon with him at the time of sale i.e. invoice price less discount. 3. Section 30 of the Act, which was deleted from 1-4-2012, provides for issuance of credit notes for discount which results in automatic reduction in the amount stated in the tax invoice and which in turn would result in lower amount of turnover and lower amount of tax. However, as per the proviso to Rule 3(2)(c), for claiming deduction for discount from the total turnover, discount has to be shown in the tax invoice. In the case of STATE OF KARNATAKA AND OTHERS v/s RELIANCE INDUSTRIES LIMITED, a Division Bench of this court has held that "there is no conflict between Rule 3(2)(c), on one hand, as pe....
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....rt in the case of M/S.PRATHAM MOTORS PRIVATE LIMITED in STA No.71/2010 decided on 6th September 2012 has held that the ratio laid down in the case of RELIANCE INDUSTRIES' case squarely applies and therefore, he submits that the judgment rendered by the Division Bench in KITCHEN APPLIANCES case on which, the rectification orders are passed by the authorities needs to be quashed. 6. Per contra, the learned Government Advocate supporting the impugned order contended that a reading of Section 30 of the Act shows that it does not deal with the turnover at all. It only provides for issuance of credit note in respect of the excess amount claimed. Rule 3(2)(c) specifically provides that, in determination of turnover, if a discount is to be reduced, the said discount should become a part of tax invoice or bill of sale otherwise the same cannot be taken into consideration in determination of turnover for the purpose of levying tax under the Act. The assessee herein had preferred a writ petition challenging the validity of Rule 3(2)(c) of the Rules being ultra vires of Section 30(1) of the Act. The ground of attack was that the rule virtually takes away the benefit sought to be given u....
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....is not mentioned in the sale invoice, the assessee is entitled to the benefit of reduction in the total turnover, which contention has been negatived. Therefore, the question that arise for consideration in these appeals is as under: Whether the assessee-dealer can claim deductions and the amounts allowed as discounts in determining the taxable turnover without the said discount being shown in the invoice? 8. Section 30 of the Act on which reliance is placed reads as under: " 30. Credit and debit notes - (1) Where a tax invoice has been issued for any sale of goods and within six months from the date of such sale the amount shown as tax charged in that tax invoice is found to exceed the tax payable in respect of the sale effected, the registered dealer effecting the sale shall issue forthwith to the purchaser a credit note containing particulars as prescribed. (2) Where a tax invoice has been issued for sale of any goods and the tax payable in respect of the sale exceeds the amount shown as tax charged in such tax invoice, the registered dealer making the sale, shall issue to the purchaser a debit note containing particulars as prescribed. (3) Any registered dealer w....
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....less discount. (d) All amounts allowed to purchasers in respect of goods returned by them to the dealer: Provided that the goods are returned within a period of six months from the date of delivery of the goods and the accounts show the date on which the goods were returned, the date on which the refund was made and the amount of such refund together with the details of credit notes issued as specified under sub-section (1) of the Section.30. (e) All amounts received from the seller in respect of goods returned to them by the dealer, when the goods are taxable under sub-section (2) of Section 3: Provided that the goods are returned within period of six months from the date of delivery of the goods and the accounts show the date on which the goods were returned and the date on which the refund was made and the amount of such refund. (f) All amounts for which goods exempt under Section 5 are sold. (g) All amounts realized by sale by a dealer of his business as a whole. (h) All amounts collected by way of tax under the Act; (i) The turnover in respect of which the dealer's agent has paid tax, and the dealer has furnished a certificate in Form VAT 140. (i-1)....
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....d then claiming reduction in tax which is to be refunded. 10. How the credit note and debit note is to be issued is provided under Rule 31 of the Rules. Again, the particulars which are to be set out in such a credit note is provided in clause 7. All that is mentioned is the value of the goods and the amount of tax credited and debited to the buyer is to be set out in the invoice. If Rule 31 is read with Section 30 in the case of charging of excess tax, in the credit note what is to be mentioned is the value of goods and the excess tax credited and if credit note is given reducing the tax amount, declare them in the returns to be furnished to the Tax Authorities claiming reduction in tax on such total turnover. As rightly pointed out in the RELIANCE INDUSTRIES case, there is no conflict between Section 30 of the Act as well as Rule 31 of the Rules. Neither Section 30 nor Rule 31 deals with the determination of turnover. 11. Section 3 of the Act is the charging Section which provides that the tax shall be levied on every sale of goods in the State by a registered dealer or a dealer liable to be registered, in accordance with the provisions of this Act. Section 4 provides that ....
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.... and a credit note is issued to him. It is understandable, the condition precedent for return of goods is, there should be valid sale and the purchaser has to pay the value of goods + tax and within six months, if he finds that the goods are defective and if there is an agreement for return of the said goods, he has to return the goods and then the dealer can raise a credit note returning the money which he had received at the time of sale. Therefore, the Legislature consciously has not insisted the amount which represents the value of the returned goods to be mentioned in the sale invoice. It looks absurd. But, when it came to the question of discounts, expressly they have provided for its legal requirement. Reason is obvious. The discount is given before sale to attract the customers and it acts as an incentive. They may also enter into a contract if it is a case of bulk sale. Therefore, if the dealer wants to have the benefit of reduction of the value representing discounts from the total turnover in the sale invoice, he can mention the gross value of the property sold + tax and discounts given and then declare the same in the returns to be filed by him on that basis, to arrive ....
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.... admitted fact in that case that no such discount has been shown in the tax invoice and the discount offered is subsequent to the raising of the tax invoice. On facts, they had opined that in terms of the proviso to Rule 3(2)(c), until and unless the discounts are shown in the tax invoice, the assessee is not entitled to any relief. Further, they held that even though the dealer may have a right to revise the sale price of their goods in accordance with the contract or otherwise, in terms of the proviso to Rule 3(2)(c), the same would have to be shown at the time of raising the tax invoice. The discount on a product cannot be offered after a sale has taken place. A discount is offered at the time of sale. Once the sale takes place, the question of offering a discount thereafter does not arise. Therefore, the said judgment lays down the law correctly. However, in subsequent judgment in the case of PRATHAM MOTORS PRIVATE LIMITED, a Division Bench of this court referred to both these decisions as well as the judgment of this court SOUTHERN MOTORS v/s STATE OF KARNATAKA AND OTHERS and observed as under: "The ratio laid down by this Court in Southern Motor's case does not prohibi....