LexM/S. SOUTHERN MOTORS versus STATE OF KARNATAKA AND OTHERS
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[2017] 2 S.C.R. 434
M/S. SOUTHERN MOTORS
v.
STATE OF KARNATAKA AND OTHERS
(Civil Appeal Nos. 10955-10971 of2016 Etc.)
JANUARY 18, 2017
[DIPAK MISRA AND AMITAVA ROY, JJ.]
Karnataka Value Added Tax Act, 2003: s.2(34) - Post sale
discoums - Determination of taxable turnover - Issue of credit notes
to the customers granting discounts - Assessee retaining only the
net amount that is, the amount shown in the invoice less the sum of
discount disclosed in credit note - Claim for deduction towards
discount accorded by credit notes from the total turnover to quantify
the taxable turnover - Held: A plain reading of s.3(2){c) reveal
that all amounts allowed as discount qualify for deduction from the
total turnover to ascertain the taxable turnover - A trade discount
conceptually is a pre sale concurrence, the quantification whereof
depends on many factors in commerce - Such trade discounts ought
not to be disallowed only if they are not payable at the time of each
invoice or deducted from the invoice price -
The overall review of
the scheme of the Act and the Rules and the underlying objectives
in particular of ss.29 and 30 of the Act and r.3 of the Rules shows
that the requirement of reference of the discount in the tax invoice
or bill of sale to qualify it for deduction has to be construed in
relation to the transaction resulting in the final sale/purchase price
and not limited to the original sale sans the trade discount -
However, the transactions allowing discount have to be proved on
the basis of contemporaneous records and the final sale price after
deducting the trade discount must mandatorily be reflected in the
accounts as stipulated under r.3(2J(c) of the Rules - Karnataka
Value Added Tax Rules, 2005 - r. 3(2){c) and its proviso.
Interpretation of statutes: Literal interpretation - Held:
Though words in a statute must be extended their ordinary meanings,
but if the literal construction thereof results in anomaly or absurdity,
the courts must seek to find out the underlying intention of the
legislature and in the said pursuit, can within permissible limits strain
434
MIS. SOUTHERN MOTORS v. STATE OF KARNATAKA AND
435
OTHERS
the language so as to avoid such unintended mischief -
Karnataka
A
Value Added T(J)( Rules, 2005 - r.3(2)(c) and its proviso.
Allowing the appeals, the Court
HELD: 1. The Karnataka Value Added Tax Act, 2003 is a
legislation, as its pream hie suggests, to provide for further levy
of tax on the purchase or sale of goods in the State of Karnataka.
Under Section 29, it is incumbent on a registered dealer effecting
a sale of taxable goods or goods exempted from tax along with
any taxable goods in excess of the prescribed value, to issue at
the time of sale, a tax invoice marked as original for the sale and
containing the particulars prescribed. Thereunder, a registered
dealer in the eventualities mentioned therein has to issue a bill
of sale containing such particulars as may be prescribed. Section
30 mandates that where such a tax invoice has been issued for
any sale of goods and within six months from the date of such
sale, the amount shown as tax charged in that tax invoice is found
to exceed the tax payable in respect of the sale effected, or is not
payable on account of goods sold being returned within the
prescribed period, the registered dealer· effecting the sale, would
issue forthwith to the purchaser, a credit note contai&ing the
particulars as prescribed. The Section further stipulates that when
a tax invoice has been issued for sale of any goods and the tax
payable in respect of the sale exceeds the amount shown as tax
charged in such tax invoice, the registered dealer making the
sale would issue to the purchaser, a debit note containing the
particulars as prescribed. It is further ordained that any registered
dealer who receives or issues credit notes or debit note~, would
declare them in his return to be furnished for the tax period in
which the credit note is received or debit note is issued and claim
reduction in tax or pay tax due thereon. [Paras 11, 13] [444-C-D;
447-B-E)
2. A plain reading of section 3(2)(c) would reveal that all
amounts allowed as discount would qualify for deduction from
the total turnover to ascertain the taxable turnover and thus the
extent of exigibility under this statute. The first proviso
prescribes that a discount to be eligible for deduction has to be
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