2015 (7) TMI 1141 - HC - VAT and Sales Tax

Valuation - KVAT Act - assessee purchased cement and sold it at a price lower than the price at which it was purchased by him - whether for the assessment year 2005-2006, the discount received by the assessee were also to be included to the turnover of the assessee, for the purpose of levying tax under the KVAT Act? - Held that - provisions of Explanation III to Clause 2 of Section 2(lii) referred to. This provision clarifies that what is to be excluded from the turnover is only a discount on the price allowed by a dealer, where such discount is shown separately in the tax invoice and the buyer pays only the amount reduced by such discount. Any reimbursement of the price received by a dealer, is liable to be included in his turnover whereas the discount allowed to the customer, and shown separately in the tax invoice, is liable to be excluded. Revision application dismissed - decided against revisionist.

Summary

Issues:
Whether discount received by the assessee should be included in the turnover for tax assessment under the KVAT Act.

Analysis:
The revision was filed by the assessee challenging the order of assessment passed under Section 25 of the KVAT Act, where the Tribunal confirmed the inclusion of discount received by the assessee in his turnover. The main contention was whether the discount should be considered as turnover based on relevant legal provisions and precedents. The assessee argued citing Circulars and judgments from various courts to support their position.

The Government Pleader, on the other hand, argued that as per Section 2(lii) of the KVAT Act, the discount received by the assessee should be included in the turnover. The court examined the provisions of the KVAT Act, specifically Explanation VII to Section 2(lii), which states that any amount received towards reimbursement for the balance of the price of goods sold at a lower price should be deemed as turnover.

The court noted that in the present case, the assessee had sold cement at a lower price and received further amounts from the supplier as reimbursement. This reimbursement, though termed as a discount, was considered as payment towards the balance price as per the statutory provisions. Additionally, Explanation III to Clause 2 of Section 2(lii) clarified that only discounts shown separately in tax invoices and paid by the buyer should be excluded from turnover.

The court emphasized that the judgments relied upon by the assessee were based on different Acts and not applicable to the KVAT Act. Furthermore, Circular No.41/2007 produced by the petitioner was found irrelevant to the case at hand as it pertained to input tax claims. Therefore, the court upheld the Tribunal's decision, dismissing the revision and confirming the inclusion of the reimbursement amount in the assessee's turnover for tax assessment under the KVAT Act.