2021 (12) TMI 379 - HC - VAT and Sales Tax

Validity of assessment order - inclusion of the margin trading profit received by the dealer during the relevant assessment year as constituting sale/turnover under the KVAT Act - HELD THAT - The Tribunal is the final Authority on consideration of fact and there ought not to be abstract application of circular dated 06.10.2016 to the case of the instant dealer. The reasons and the principles applied by the Authority ought to be considered by the Tribunal instead of this Court examining the circular dated 06.10.2016 and applying to the facts of the case. He suggests that the Tribunal could be called upon for re-examination of the issue by keeping in perspective the decision taken in circular dated 06.10.2016 and case could be remitted to the Tribunal. The matter requires reconsideration by the Tribunal by adjudicating the circumstances stated by the dealer and application of circular in the case on hand to the case of instant dealer - revision allowed by way of remand.

Summary

Issues:
1. Inclusion of margin trading profit in turnover under the Kerala Value Added Tax Act, 2003.

Analysis:
The judgment pertains to a dealer registered under the Kerala Value Added Tax Act, challenging an order of the Kerala Value Added Tax/Agricultural Income Tax and Sales Tax Appellate Tribunal regarding the inclusion of margin trading profit in turnover. The dealer argued that the margin trading profit should not be considered as constituting sale/turnover under the KVAT Act. The dealer's contention was based on the premise that the profit or loss from margin trading arises due to the cancellation of contracts and does not meet the definition of 'sales' or 'turnover' under the Act. However, the Tribunal did not accept these arguments, leading to the revision before the High Court.

The petitioner emphasized that the circumstances were undisputed, and the interpretation of Sections 2(xliii) and 2(lii) of the KVAT Act was crucial. The petitioner relied on a clarification order issued by the Commissioner of Taxes, stating that margin trading profit should not be included in turnover as it does not constitute a sale. The petitioner sought to set aside the Tribunal's order based on this circular and reverse the inclusion of turnover.

On the other hand, the Senior Government Pleader contended that the circular was not presented before the Tribunal, and the Tribunal's decision should be final based on the facts and principles applied. It was suggested that the Tribunal should reconsider the issue in light of the circular and that the case could be remitted for further examination.

The High Court, in its judgment, decided that the matter required reconsideration by the Tribunal, specifically taking into account the circular dated 06.10.2016. The Court refrained from independently analyzing the dealer's circumstances and the application of relevant sections of the Act. The Tribunal's order was set aside, and the matter was remitted to the Tribunal for fresh consideration, with a directive to dispose of the case within six months. Both parties were granted the liberty to present any circulars or materials supporting their respective cases. Ultimately, the revision was allowed as per the directions provided by the Court.