O.T.Rev.No.168 of 2015

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN &** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **TUESDAY, THE 3RD DAY OF JULY 2018 / 12TH ASHADHA, 1940** **AGAINST THE ORDER/JUDGMENT IN TAVAT 619/2013 of KERALA VALUE ADDED TAX APPELLATE TRIBUNAL,ADDL.BENCH,PKD DATED 31-03-2015** **REVISION PETITIONER(S)/APPELLANT/APPELLANT/ASSESSEE** **V.V.SHAMEER PROPRIETOR, NCV AGENCIES, PATTITHARA PANCHAYATH, P.ANGADI P.O., PALAKKAD.** **BY ADVS.SRI.N.MURALEEDHARAN NAIR SRI.V.K.SHAMUSUDHEEN** ## **RESPONDENT(S)/RESPONDENT/RESPONDENT/STATE:** **STATE OF KERALA** **BY SRI.MOHAMMED RAFIQ, SR.GOVERNMENT PLEADER** **THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 03-07-2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **OT REV.168/2015** ## **APPENDIX** ## **PETITIONER'S EXHIBITS** **ANNEXURE-A : COPY OF THE ASSESSMENT ORDER PASSED BY COMMERCIAL TAX OFFICER, PATTAMBI FOR THE ASSESSMENT YEAR 2008-09 DATED 29.9.2010.** **ANNEXURE-B : COPY OF 1ST APPELLATE ORDER PASSED BY ASSISTANT COMMISSIONER (APPEALS) O/O OF THE DEPUTY COMMISSIONER (APPEALS), DEPARTMENT OF COMMERCIAL TAXES, PALAKKAD FOR THE YEAR 2008-09 DATED 30.06.2011.** |**ANNEXURE-C :**|**COPY OF APPEAL FILED BY THE PETITIONER BEFORE THE APPELLATE**| |---|---| |**TRIBUNAL DATED 16.01.2012.**|| |**ANNEXURE-D :**|**COPY OF ARGUMENT NOTE FILED BEFORE THE APPELLATE TRIBUNAL**| |**DATED 05.11.2014.**|| |**ANNEXURE-E :**|**COPY OF TRIBUNAL ORDER PASSED BY KERALA VALUE ADDED TAX**| |**ADDITIONAL APPELLATE TRIBUNAL, PALAKKAD IN TAVAT NO.619/2013 DATED 31.3.2015.**|| |**ANNEXURE-F :**|**COPY OF LEDGER FOLIO FROM 1.4.2008 TO 31.3.2009.**| |**ANNEXURE-G :**|**COPY OF TRADING AND PROFIT AND LOSS ACCOUNT.**| |**ANNEXURE-H :**|**COPY OF DECLARATION DATED 21.7.2010.**| ||**//TRUE COPY//**| ||**PS TO JUDGE.**| jg-9/7 K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- O.T.Rev.No.168 of 2015 ------------------------------------------- Dated this the 3[rd] day of July, 2018 ## O R D E R ## Vinod Chandran, J. The petitioner/assessee aggrieved by the order of the Kerala Value Added Tax Appellate Tribunal, refusing input tax credit to the extent the assessee received incentives from its manufacturer, is before us raising the following questions of law as framed in the memorandum of revision: “(1) Whether on the facts and in the circumstances of the case the order of the Appellate Tribunal is sustainable under law? (2) Whether on the facts and in the circumstances of the case the Appellate Tribunal was correct in law in confirming the dis-allowance of the discount despite filing of credit notes and declaration as per circular NO.41/2007 issued by the supplier company? (3) Whether on the facts and in the circumstances of the case the Appellate Tribunal was correct in law in holding that the circular instructions contained in 41/2007 are not applicable to dealers like the petitioner? (4) Whether on the facts and in the circumstances of the case the Appellate Tribunal was correct in law in upholding the finding of the authorities below that the OTRev.168/2015 -2- petitioner had not accounted the turnover in question especially when the same are contained in the books of accounts and documents produced by the petitioner?” 2. The petitioner/assessee is a dealer in electrical items who had claimed input tax credit for the tax paid on purchase of goods from its manufacturer. The assessee had not disclosed any incentive having been given to the assessee by the manufacturer. However, the audited statement revealed an incentive of Rs.11,18,322/-. On the input tax credit, the Assessing Officer (AO) found that there should be a reduction to that extent, especially since there was no disclosure of the incentive received in the returns filed. In fact, the assessee had an opportunity to revise the returns under Section 42(2) on a discrepancy being noticed in the audited statement, which was also not availed of. 3. On notice being issued for declining the input tax credit to the extent of the incentive received by the assessee, the assessee produced certain credit notes before the AO and also a declaration as seen from Annexure-H. Before the AO, it was contended that the OTRev.168/2015 -3- incentive received was with respect to the schemes floated by the manufacturer for achieving sales targets and also for meeting the distribution expenses. Credit notes were filed, but not in Form No.9 as prescribed under the Kerala Value Added Tax Act, 2003 ('Act', for short). The AO found that the details as available in form No.9 is not seen in the credit note filed by the assessee before the AO. The AO also did not refer to any declaration having been filed by the assessee of the manufacturer. 4. The learned counsel for the assessee argued that no credit note can be filed in form No.9 since it specifically deals with only return of goods. Rule 59 of the Kerala Value Added Tax Rules, 2005 ('Rules', for short) speaks of credit notes to be issued under Form NO.9 in cases where Section 41 is applicable, which provision is specifically with respect to return of goods. It is also argued that if there is no deduction of output tax claimed by the manufacturer, going by circular No.41/2007 and the binding precedent in (2008) 16 KTR 287 (Ker) [Priya Agencies v. Commercial Tax OTRev.168/2015 -4- Officer] , the assessee is entitled to the entire input tax credit. 5. The learned Senior Government Pleader however points out that form No.9 is the prescribed form of credit note under the Act and in all circumstances where a credit note is to be raised it has to be in form No.9. It is also submitted that the assessee having not revised the return rectifying it on the basis of the audit statement filed, there could be no input tax credit claimed with respect to the incentive obtained by the assessee. It is pointed out that Clause (ii) of Explanation III to Section 2(lii) permits a discount only in circumstances where it is shown separately in tax invoice and the purchaser has paid only the reduced amount as shown in the tax invoice or with respect to any amount refunded in respect of goods returned by the customers. Admittedly, there is no such ground available with the assessee on the incentive claimed. 6. Fifth proviso to Section 11(3) of the Act also is referred, to argue that, earlier, it mandated dis- OTRev.168/2015 -5- allowance of any input tax credit with respect to a discount granted after the tax is paid on the turnover. Subsequently, a circular was issued as Circular No.41/2007 wherein such input tax credit was permissible, when there is reimbursement of expenses made by way of credit notes and there is a declaration as to no output tax deduction having been claimed by the manufacturer. This circular was applicable only to cement dealers. But this Court in Priya Agencies (supra) found that the Circular being confined to cement dealers is not proper and it should be extended to all dealers. Hence, there was an amendment made to the fifth proviso bringing in such condition of credit notes being made available along with the declaration of no output tax deduction having been claimed. 7. Having gone through Form No.9, we are of the opinion that it is not confined to a mere transaction of return of goods. Rule 59 and Section 41 read together would only indicate that if a credit note is issued on return of goods, then it should be in form No.9. This is not to say that the form prescribed for OTRev.168/2015 -6- credit note under the Act is exclusively for the purpose of return of goods. A reading of the form and the various details enumerated therein would also indicate that, the form would take in all instances where a credit note is issued, based on which a claim is raised by an assessee. 8. On facts, we find that the credit note having not been issued in the prescribed form, there is no question of an input tax credit being granted with respect to the incentive, as has been held by the AO. We are of the opinion that the Tribunal has rightly confirmed the order of the AO. The credit notes as relied on by the assessee was not in form No.9 and as noticed by the AO, it does not contain the details that would be necessary for allowing the claim of credit given to the dealer by the manufacturer. The question of law with respect to circular No.41/2007 would not arise since the assessee had not made a claim with the prescribed form. Though the amounts were disclosed in the books of accounts, discrepancy was noticed in the audit statement and the OTRev.168/2015 -7- petitioner did not attempt a revised return under Section 42 of the Act. In such circumstances, we are of the opinion that the questions of law raised are to be answered against the assessee and in favour of the Revenue. We dismiss the revision leaving the parties to suffer their respective costs. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE jg