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TMI Blog2015 (3) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... it note should be issued and what are the details which the credit note should contain is what is stipulated in Rule 31. However, Rule 3 deals with the determination of the turnover. Sub-Rule 2 deals with the deductions from the total turnover to arrive at the taxable turnover. If a dealer has given discount and wants to claim deductions from the total turnover to arrive at the taxable turnover, the condition precedent is all amounts allowed as discounts should be shown in the tax invoice or bill of sale, as discounts allowed and then only the said amount could be deducted from the taxable turnover. However, if the discount given is not shown in the tax invoice or bill of sale, then the dealer is not entitled to deduction of the said amount from the total turnover. Once the sale invoice is issued and the sale price is collected along with tax, the aggregate of such sale constitutes the total turnover and the tax is payable on taxable turnover. To arrive at the taxable turnover what are the deductions that are legitimately be made is provided under Rule 3(2) of the Rules. One such permissible deduction is that the amount paid by way of discount provided that the discount is refl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KARNATAKA AND OTHERS v/s RELIANCE INDUSTRIES LIMITED, a Division Bench of this court has held that there is no conflict between Rule 3(2)(c), on one hand, as per which discount has to be mentioned in the tax invoice and section 30 and Rule 31, on the other hand, which provide for issuance of credit note for discount which results in automatic deduction in the amount stated in the tax invoice and which in turn would result in lower amount of turnover and lower amount of tax. Relying upon the said judgment, the assessee claimed for deduction of discount given by issuing credit notes. By following the decision of this court in the case of RELIANCE INDUSTRIES, the same was allowed by the Assessing Authority for the tax periods 2007-08 and 2008-09. 4. The 3rd respondent subsequently, vide order dated 21-05-2012 under Section 41(1) of the Act has rectified the said reassessment orders by disallowing the discount given by way of credit notes by relying on the later decision rendered by another Division Bench of this court in the case of STATE OF KARNATAKA v/s M/s. KITCHEHN APPLIANCES INDIA LIMITED reported in 2011 (71) Kar.LJ 234 (HC)(DB) wherein it is held that no deduction on discou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(2)(c) of the Rules being ultra vires of Section 30(1) of the Act. The ground of attack was that the rule virtually takes away the benefit sought to be given under Section 30 of the Act. It only provides for issuance of credit and debit notes and essentially for the purpose of availing discount from the turnover of an assessee, even though the invoices value might have shown the net price inclusive of discounts, etc. Further it was contended that a dealer is compelled to disclose what discount he is offering at the time of transaction, whereas under the Act, under Section 30, a time-limit of six months is given to the dealer to make up what discount he is offering, etc. Therefore, the proviso to Rule 3(2)(c) is discriminatory. Repelling the said contention, this court in the case of SOUTHERN MOTORS v/s STATE OF KARNATAKA AND ANOTHER reported in (2008) 18 VST 161 (Karn) held as under: The rule only stipulates the disclosure of some information and does not either create a new liability or an additional liability or in any way come in the way of assessees claiming the benefit under Section 30 of the Act. That is a procedure for claiming the benefit. Moreover, the benefit envi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax invoice, the registered dealer making the sale, shall issue to the purchaser a debit note containing particulars as prescribed. (3) Any registered dealer who receives or issues credit notes or debit notes shall modify his return for the period in which the credit note or debit note is issued and pay any tax due on such return. Rule 31 of the Rules deals with the particulars of the credit and debit notes which reads as under: 31. Particulars of credit and debit notes. - Where a registered dealer has given a tax invoice in respect of a sale of goods and thereafter the goods or any part thereof are returned to the seller if the sale is cancelled or for any other reason, or the value of the sale is altered, whether due to a discount or otherwise, he shall, subject to the provisions of Section 30, give to the buying dealer a credit or debit note containing the following details, namely. - (1) the nature of the document issued; (2) a consecutive serial number; (3) the date of the issue of the document; (4) the name, address and registration number of the selling dealer; (5) the name and address of the buyer, together with buyer's registration number, if register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax under the Act; (i) The turnover in respect of which the dealer's agent has paid tax, and the dealer has furnished a certificate in Form VAT 140. (i-1) All amounts paid (or payable) to sub- contractors as the consideration for execution of works contract whether wholly or partly: Provided that, no such deduction shall be allowed unless the dealer claiming deduction produces document in proof that the sub-contractor is a registered dealer liable to pay tax under the Act and that the turnover of such amounts is included in the return filed by such sub-contractor.) (Provided further that no such deduction shall be made where deduction of input tax is claimed in respect of tax paid to any sub-contractor.) (j) All amounts separately collected in tax invoices as commission under the provisions of the Agricultural Produce Marketing (Regulations) Act, 1966, by a commission agent: Provided that the tax is not separately charged for and collected in the tax invoices on such commission. (k) All amounts received or receivable by way of interest on the unpaid amount payable in respect of goods delivered on hire purchase or on any system of payment by instalments, where such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry sale of goods in the State by a registered dealer or a dealer liable to be registered, in accordance with the provisions of this Act. Section 4 provides that every dealer who is or is required to be registered shall be liable to pay tax, on his taxable turnover. Taxable turnover is defined under Section 2(34) of the Act to mean that the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed. The total turnover is defined under Section 2(35) of the Act to mean the aggregate turnover in all goods of a dealer at all places of business in the State. The word 'turnover' is also defined under Section 2(36) of the Act to mean the aggregate amount for which goods are sold or distributed or delivered or otherwise disposed of in any of the ways referred to in clause (29) by a dealer. Rule 3 deals with the determination of turnover. The total turnover of a dealer, for the purposes of the Act, shall be aggregate of what is mentioned in the said Rule. Sub-Rule (2) of Rule 3 deals with the determination of taxable turnover. The taxable turnover shall be determined by allowing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can mention the gross value of the property sold + tax and discounts given and then declare the same in the returns to be filed by him on that basis, to arrive at the taxable turnover. If the said discount is not reflected in the sale invoice, the same cannot be deducted from the total turnover in arriving at the taxable turnover. The language employed in sub-Rule (2) is emphatic namely the taxable turnover shall be determined by allowing the deductions and the proviso to clause (c) of Sub-rule (2) of Rule (3) makes it mandatory that the said discount should be reflected in the sale invoice otherwise the dealer-assessee is not entitled to deduct the amount of discount from the total turnover. 12. In the case of RELIANCE INDUSTRIES LIMITED , all that has been held is that the issuance of credit notes would automatically mean that the amounts as mentioned in the invoices would be reduced which would result in reduction in the over all turnover relating to the goods sold for the particular month. Then the court has observed that the Tribunal has not taken into consideration various details with regard to variation in the total turnover on account of credit notes issued. The Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt SOUTHERN MOTORS v/s STATE OF KARNATAKA AND OTHERS and observed as under: The ratio laid down by this Court in Southern Motor's case does not prohibit the issuance of credit note subsequent to the sale bill. It is held that such modification in the sale bill is permitted if it is done within six months from the date of sale transaction. In Kitchen Appliances' case, the issue was whether Rule 3(2)(c) and Rule 31 of the Rules are inconsistent and are in-conflict with each other. The issue whether the credit note could be issued separately after issuance of sale bill was not under the consideration in the said case. The ratio laid down by this Court in the case of Reliance Industries squarely applies to the facts of this case. Accordingly, we answer the question of law against the revenue. 13. As is clear from the aforesaid observations in the said judgment, no law is laid down. Therefore, from the aforesaid discussion it is clear that a harmonious reading of Section 30, Rule 31 and Rule 3(2)(c) makes it clear that if a dealer/assessee has claimed the tax in excess of what is payable under the Act, he can issue a credit note for the excess amount claimed from the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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