2024 (2) TMI 351 - HC - GST

Valuation u/s 15(3) - Validity of GST on volume discount - Petitioner submited that, GST is levied and paid on the entire invoice amount, which includes volume discount. - Demand of GST on volume discount would be double taxation. - HELD THAT - Although the Court exercising its jurisdiction under Article 226 of the Constitution, Section 7 of the TNGST Act, 2017 would ordinarily refrain from entertaining a writ petition against an assessment order, where the petitioner has an effective and an alternate remedy, the Court is of the view that this is a fit case for entertaining this writ petition - This Court is of the view that the impugned orders are liable to be quashed and the cases deserve to be remitted back to pass a de-novo order in the light of the observation contained herein. Both the clarifications (clarification in Circular No.92/11/2019-GST dated 07.03.2015 and clarification issued vide circular No.92/11/2018-GST dated 07/03/2019) are not relevant to the facts of the present case either in support of the present writ petition or in favour of the respondent to dismiss the writ petition. They are not in any event binding on this Court in terms of the decision of the Collector of Central Excise Vs. Dhiren Chemical Industries 2002 (2) TMI 115 - SC ORDER . The Hon'ble Supreme Court held that clarification of the Board are not binding on the Courts though they may bind the Assessing Officers and field formations - Under the scheme of the respective GST Enactments, 2017 each instance of supply of goods or services are chargeable to tax under Section 9. The expression supply has been defined in Section 7 if the respective GST Enactments, 2017. The discount offered to the petitioner can impact only the transaction value of the supplier of the petitioner. As far as the transaction value of the petitioner is concerned, it is the price which has been paid or actually payable for the supply of the goods - there is no scope for confusing the discount offered to the petitioner and the discounted price at which the petitioner effects further sale to its customers. They are two independent transactions and there is no scope for intermingling them for demanding tax from the petitioner. The discounted price at which the petitioner sells the goods is relevant only for determining the transaction value adopted by the petitioner - Unless, the discounted price itself was on account of the subsidy as a result of which while the supplier would have been compensated without including into the transaction value in the invoice, question of adding such value to the transaction value of the petitioner cannot be countenanced. The cases are remitted back to the respondent. The respondent is directed to pass order on merits in accordance with law, within a period of three (3) months from the date of receipt of copy of this order - Petition allowed.

Summary

Issues Involved:
1. Legality of the impugned assessment orders for various assessment years.
2. Jurisdiction and applicability of Section 15 of the CGST Act, 2017 / TNGST Act, 2017.
3. Validity of levying GST on volume discounts.
4. Availability of alternate remedy under Section 107 of the respective GST enactments.

Summary:

1. Legality of the Impugned Assessment Orders:
The petitioners challenged the impugned assessment orders for the years 2017-18 to 2021-22. The impugned orders demanded tax, imposed penalties, and charged interest based on information gathered before passing the orders.

2. Jurisdiction and Applicability of Section 15 of the CGST Act, 2017 / TNGST Act, 2017:
The impugned orders concluded that discounts on the value of supply can only be allowed as specified in Section 15(3)(a) and (b) of the GST enactments. The orders stated that the value of supply shall not include any discount given after the supply unless it is established in terms of an agreement entered into at or before the time of supply and specifically linked to relevant invoices, and input tax credit attributable to the discount has been reversed by the recipient.

3. Validity of Levying GST on Volume Discounts:
The petitioner argued that GST is levied on the entire invoice amount, which includes volume discounts. Since the volume discount is already part of the transactional value, it cannot be added again to the invoice value for GST purposes, as it would result in double taxation. The petitioner contended that the impugned order is erroneous and should be quashed.

4. Availability of Alternate Remedy under Section 107 of the Respective GST Enactments:
The respondent argued that the petitioner has an alternate remedy before the Appellate Commissioner under Section 107 of the CGST/SGST Act and that the writ petitions are not maintainable. The respondent also relied on clarifications issued by the Central Board of Indirect Taxes and Customs regarding discounts.

Court's Conclusion:
The court held that the impugned orders are liable to be quashed and remitted the cases back to the respondent for passing a de-novo order. The court observed that the discount offered to the petitioner cannot form part of the "transaction value" of the petitioner unless it is linked to a subsidy by a third party. The court directed the respondent to pass an order on merits within three months from the date of receipt of the order, following the procedure in place at the time when the notice was issued. The writ petitions were allowed with no order as to costs, and connected miscellaneous petitions were closed.