2012 (9) TMI 907 - HC - VAT and Sales Tax

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 ? 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. In Kitchen Appliances case 2011 (7) TMI 1051 - Karnataka High Court the issue was whether rule 3(2)(c) and rule 31 of the Rules are inconsistent and are in conflict with each other. The issue whether the credit note could be issued separately after issuance of sale bill was not under the consideration in the said case. The ratio laid down by this court in the case of Reliance Industries 2010 (2) TMI 1116 - Karnataka High Court squarely applies to the facts of this case. Accordingly, we answer the question of law against the Revenue. In that view of the matter, the impugned order is set aside and the matter is remanded to the assessing officer for fresh consideration by giv ing opportunity to the appellant/assessee to prove that the discount shown in the credit bills has been really extended to the customers.

Summary

Issues:
1. Applicability of discounts given by the appellant to customers.
2. Competence and authority of the Additional Commissioner of Commercial Taxes.
3. Interpretation of statutory provisions and judgments related to discounts and tax invoices.
4. Permissibility of claiming deductions for discounts not shown in the tax invoice.

Analysis:
1. The appellant provided discounts to customers, not reflected in the sale invoice but through separate credit notes issued post-invoice. The dispute arose regarding the allowance of deductions for these discounts. The assessing officer disallowed the deduction, stating the discounts not shown in the sale invoice were ineligible. The Joint Commissioner overturned this decision, but the Additional Commissioner reversed it, leading to the appellant's appeal.

2. The appellant raised substantial questions of law challenging the Additional Commissioner's authority to disregard a previous judgment and questioning the validity of the revisional order without proper jurisdiction conferred by the Commissioner. The appellant also contested the Additional Commissioner's interpretation of rules regarding discounts offered through credit notes and their impact on turnover and sales tax payable.

3. The court reconsidered the issue, framing a new substantial question of law concerning the permissibility of claiming discounts via separate credit notes not initially included in the tax invoice. Legal arguments referenced previous court decisions, such as the Southern Motors case and the Kitchen Appliances India Limited case, to support opposing views on whether discounts must be shown in the sale bill to be eligible for deduction.

4. The court relied on the Reliance Industries Ltd. case, emphasizing the permissibility of issuing credit notes post-sale bill to reflect discounts offered to customers. It differentiated between rule 3(2)(c) and rule 31 of the Karnataka Value Added Tax Rules, asserting that discounts shown in credit notes after issuing sale invoices lead to a reduction in turnover and sales tax liability. Consequently, the court set aside the impugned order, remanding the matter for fresh consideration by the assessing officer to validate the discounts extended to customers through credit notes.