2016 (7) TMI 39 - HC - VAT and Sales Tax

Valuation - reduction of discount given to customers on the sales finalized at the year end from the next year s turnover - assessment year 2007-08 - Since this event took place during the financial year 2008-09, the assessee claimed credit of such discounted sale price and the consequential reduced tax collected from the consumers in such year. - Commissioner was of the opinion that the benefit of discounted price could be granted to the dealer only during the same year in which the event took place. - Tribunal observed that he procedure adopted by the assessee was legal and proper. - Sections 60 and 61 of the Gujarat VAT Act and Rule 43 of the VAT Rules Held that - In terms of Sections 60 and 61 of the VAT Act thus, the assessee was entitled to issue credit notes once the amount of tax shown as charged in the tax invoice exceeded the actual tax charged in respect of the sale concerned. This is precisely what the assessee had done and claimed benefit of reduced tax collected from the purchasers. This devise, in our opinion, was not prohibited by Section 8 of the VAT Act, reliance upon which has been made by the department. In essence what the assessee did, was to reduce the total turnover of the assessment year 2008-09 to the extent its value after discount during the previous year had come down which would have a direct relation to the tax payable by the assessee. - No demand - Decided against the revenue.

Summary

Issues:
Challenge to the judgment of the Value Added Tax Tribunal regarding the adjustment of discounted sale price and reduced tax collected by the respondent-assessee for the assessment year 2007-08.

Analysis:
The State Government filed a petition challenging the Tribunal's decision allowing the revision petition of the respondent-assessee. The assessee, engaged in the manufacture and sale of cement, issued credit notes to customers in the last quarter of the financial year 2008-09, finalizing discounts on sales made in the previous year. The Commissioner objected, disallowing the adjustments and raising a revised tax demand. The Tribunal, relying on Sections 60 and 61 of the VAT Act and Rule 43 of the VAT Rules, held the assessee's procedure legal. The Tribunal's decision was based on the timing of finalizing discounts and issuing credit notes, which was a regular practice for the assessee.

The Tribunal's observation aligned with Section 61 of the VAT Act, which allows for credit notes when the tax charged exceeds the actual tax. The Tribunal found the assessee's actions compliant with the statutory provisions. Section 8 of the VAT Act permits adjustments in tax for altered considerations due to discounts or other reasons. The department argued that Section 8 allows tax adjustments, not re-adjustments of total turnover. However, the court found the assessee's methodology did not lead to incorrect tax assessment, as it reduced the total turnover for the relevant year based on discounted values from the previous year.

In conclusion, the petition challenging the Tribunal's judgment was dismissed, and notice was discharged. The court upheld the Tribunal's decision, emphasizing that the assessee's actions were in line with statutory provisions and did not result in incorrect tax assessment.