2015 (11) TMI 1654 - HC - VAT and Sales Tax

Restoration of rectification order - exemption in respect of discounts granted subsequent to the issuance of tax invoice - Rule 3(2)(c) of the KVAT Rules 2005 - Held that - there has been no exercise undertaken by the authorities to verify the material particulars of the returns submitted by the assessee. It is also not demonstrated by the assessee as to what is the material he has placed before the authorities and this Court is constrained to observe that both the parties have failed to place on record the material particulars that ought to have been considered and nothing is forthcoming as to what has been appreciated in the instant case. The impugned orders do not reveal as to what are the details that were placed by the assessee before the Authorities and what are the details that the authorities verified before concluding the assessment. The records do not reveal if the assessee has formulated any incentive scheme or that he has entered into any contract or agreement with the purchasers and that the credit notes issued by him are in pursuance of the incentive scheme or the contract or agreement. The proceedings also do not reveal as to whether the assessee has placed before the authorities the tax invoices sale bill and monthly returns along with the credit and debit notes. It is incumbent upon the assessee to place the aforesaid records before the authorities and the authorities ought to consider the same and thereafter render a finding. This Court after perusal of the records is convinced that such an exercise is not forthcoming from the records. Under the circumstance this Court is of the considered opinion that it is a fit case to be remanded to the Assessing Authority with a direction to the appellant/assessee to furnish all details - appeal allowed by way of remand.

Summary

Issues Involved:
1. Competence of the Additional Commissioner of Commercial Taxes to treat a High Court judgment as a mere order.
2. Permissibility of claiming deductions for discounts shown by separate credit notes not reflected in the tax invoice or sale bill.
3. Requirement for authorities to consider factual aspects and material particulars before applying legal precedents.

Detailed Analysis:

Issue 1: Competence of the Additional Commissioner of Commercial Taxes
The court addressed whether the Additional Commissioner of Commercial Taxes, Zone-I, had the authority to treat the judgment dated 16.02.2010 in STRP No.117 to 121/2008 as a mere order without following it. The court emphasized that any judgment rendered by the High Court or the Apex Court is binding on subordinate authorities, including the Tribunal, Revisional Authority, and First Appellate Authority. The authorities are required to follow precedents applicable to the facts of the case. Therefore, the first substantial question of law was answered affirmatively, reinforcing that judgments from higher courts must be adhered to by subordinate authorities.

Issue 2: Permissibility of Claiming Deductions for Discounts via Credit Notes
The court examined whether it is permissible for the assessee to claim deductions for discounts given through separate credit notes, which were not shown in the tax invoice or sale bill. The court referred to the Apex Court's judgment in the IFB Industries Ltd. case, which dealt with similar provisions under the General Sales Tax Rules of Kerala. The principle established by the Apex Court was deemed applicable, allowing dealers to issue credit and debit notes for further discounts, provided these discounts are customary trade practices or pursuant to a contract or agreement between the seller and the dealer. The onus is on the assessee to demonstrate that such discounts comply with the provisions of the Act and Rules. Thus, the second substantial question of law was answered affirmatively, permitting further discounts under specified conditions.

Issue 3: Requirement for Authorities to Consider Factual Aspects
The court highlighted that authorities must engage in a detailed discussion of the factual aspects and material particulars of the case before applying legal precedents. In this case, the authorities failed to state the documents inspected, whether they made a comparative assessment of tax invoices and sale bills with credit and debit notes, or verified monthly returns as mandated under Rule 38 of the Rules. The court concluded that the authorities must first establish the facts and material particulars and then apply the legal precedents to those facts.

Conclusion and Order:
The court found that the impugned orders did not reveal the details placed by the assessee before the authorities or the details verified by the authorities before concluding the assessment. The records did not show if the assessee had formulated any incentive scheme or entered into any contract or agreement with purchasers, nor whether the credit notes issued were pursuant to such schemes or agreements. The court remanded the case to the Assessing Authority, directing the appellant/assessee to furnish all relevant details. The Assessing Authority was instructed to reconsider the entire matter in light of the discussed provisions and pass fresh orders in accordance with the law. Consequently, the orders dated 13.03.2009 and 11.01.2012 were set aside, and the appeal was disposed of.