Important Caselaws - April 2014

Wipro Limited - Form C can be issued even when the same is not declared in the VAT returns
Maya Appliances - Quantity Discount even if disclosed on the invoice cannot be allowed as deduction
ABB - Inter State movement of goods in pursuance of works contract liable to CST and not local VAT

Wipro Limited vs The State of Karnataka WP No 55411/2013 - Kar HC

• Dealers are required to declare the stock transfer inwards and inter state purchase details in the monthly VAT returns and electronically apply for Form F and Form C for the respective transactions.  In the instant case, the dealer inadvertently failed to mention the stock transfer inward and inter state purchase details in his monthly returns and accordingly was unable to apply for Form F and Form C.  The error was noticed only at the time of finalizing the Karnataka VAT Audit.  The dealer approached the Local VAT Officer and requested for issuance of Form F and Form C.  The VAT authorities issued an endorsement stating that the VAT returns filed by the dealer are incomplete because the stock transfer and inter state purchase details are not mentioned in the returns and accordingly Form F and Form C cannot be issued.  The Karnataka High Court observed that in case of incomplete returns, the KVAT Rules provide for issuance of Form 150 by the VAT authorities requiring the dealer to complete the returns within 10 days.  The said procedure was not followed by the VAT authorities.  The Court directed the dealer to treat the endorsement as notice in Form 150 and correct the returns within 10 days of receiving the order copy

M/s Maya Appliances (P) Ltd Vs Additional Commissioner of Commercial Taxes 2014-TIOL-504-HC-KAR-VAT

• In the instant case, the Karnataka High Court disallowed quantity / trade discount in tax invoices as deduction for taxable turnover computation under Rule 3 of Karnataka VAT (KVAT) Rules.  The Court observed that discount granted as incentive to dealers for past performance, not relatable to sale of goods mentioned in sale invoice.  Proviso to Rule 3(2)(c) of KVAT Rules mandates tax invoices to reflect trade discounts in respect of sale of goods mentioned therein.  Although gross value of goods plus tax along with quantity discount stated in invoice, assessee not entitled to Rule 3 deduction for defiance of aforesaid condition.  The High Court distinguished the SC ruling in IFB Industries and Patna HC ruling in Mapra Laboratories Pvt Ltd

ABB Limited vs The State of Karnataka 2014-VIL-90-KAR

• In the instant case, the Karnataka High Court held that a sale which occasions movement of goods from one State to another is a sale in the course of inter-State trade, no matter in which State the property in goods passes. It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement, and it is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It would be sufficient if the movement was in pursuance of and incidental to the contract of sale.