2012 (2) TMI 606 - HC - VAT and Sales Tax

Summary

Issues involved: Assessment of stock transfer value u/s 25(2) of the KVAT Act, discrepancy between stock transfer value and sales turnover, eligibility of discount as deduction.

Assessment of stock transfer value: The petitioner, a Government of Tamil Nadu Company, challenged the assessment of stock transfer value ignoring the declared sales turnover. The petitioner contended that tax should be levied only on the taxable turnover after excluding discounts as per S.25(2) of the KVAT Act. The Court noted that the authorities failed to consider how discount should be treated as an eligible deduction. It was held that sales tax under the KVAT Act is payable only on sales turnover after granting admissible deductions, including eligible discount.

Discrepancy between stock transfer value and sales turnover: The department argued that the difference between stock transfer value and sales turnover should be assessed in addition to sales turnover. However, the Court emphasized that such assessment cannot be made unless it is proven to be a suppression of sales turnover. The matter was deemed to require detailed examination by the assessing officer, including verification of invoices and clarification on the basis of adopting stock transfer value above sale price.

Eligibility of discount as deduction: The Court directed the Assessing Officer to vacate the Tribunal's orders and remand the matter for further examination. The petitioner was instructed to explain the basis of showing a higher value on stock transfer than the realizable market value for the goods. The Assessing Officer was directed to give credit for the full amount of tax paid and to reconsider the matter after allowing the petitioner to produce invoices and clarify the basis of the stock transferred value.