C. N. Ramachandran Nair :-

This revision is filed against the order of the VAT Appellate Tribunal upholding the addition of incentive received by the petitioner from the manufacturer in the form of credit notes as turnover under Explanation VII to section 2(lii) of the Kerala Value Added Tax Act, 2003. We have heard senior counsel Dr. Muhamed Kutty appearing for the revision petitioner and Sri Mohammed Rafiq, Government Pleader appearing for the respondent.

The revision petitioner is a dealer in ceramic tiles, vitrified tiles, sanitary items, etc. During the year 2005-06, the revision petitioner received an amount of Rs. 21,65,301 in the form of credit notes from the manufacturer - company whose distributor the petitioner was. On examination of the returns and accounts, the assessing officer noticed that tiles purchased by the petitioner from outside the State were sold at less than the purchase price and the amount received through credit notes from the manufacturer was towards differential price assessable as turnover under Explanation VII to section 2(lii) of the Act. He therefore added the entire amount received by the petitioner from the manufacturer through credit notes to the taxable turnover. First appeal filed by the petitioner was unsuccessful and hence the second appeal was filed before the Tribunal, which rejected the appeal. It is against this order of the Tribunal, this revision is filed.

Senior counsel appearing for the petitioner contended that the amount received by the petitioner from the manufacturer is in the form of discount on inter-State purchases which is not assessable under the Explanation above referred. He also raised a contention that the finding of the lower authorities including the Tribunal that the goods were sold at a price less than the purchase price is incorrect because according to him there is gross profit of 0.36 per cent disclosed in the account and so much so Explanation VII to section 2(lii) is not attracted. The Government Pleader on the other hand took us through the findings of the lower authorities wherein it is clearly stated that the purchase price is accounted by the petitioner without including freight charges and loading and unloading charges and so much so when the same is also reckoned the sale price is below the purchase cost attracting Explanation VII to section 2(lii) of the Act. It is also to be noticed from the finding of the Tribunal that in some cases, goods were sold at a price less than the price shown in the purchase bill itself. In any case we do not think there is any justification for us to interfere with the finding on facts recorded by the Tribunal wherein they have stated that the sale price is below the purchase price of the goods, namely, tiles. Explanation VII to section 2(lii) is as follows :

"Where a dealer sells any goods purchased by him at a price lower than that at which it was purchased and subsequently receives any amount from any person towards reimbursement of the balance of the price, the amount so received shall be deemed to be turnover in respect of such goods."

It is obvious from the above that the purpose of the Explanation is to levy tax on the actual sale price irrespective of whether it is received by the dealer at the time of sale of goods or from the purchaser itself. In other words, any amount received by a dealer by way of consideration for sale of goods whether it is received from the purchaser or not is assessable as turnover in respect of the goods sold. The question whether sale is at below the purchase price is a matter to be decided not based on purchase price accounted by the dealer or the amount shown in the invoice, but the actual purchase price which certainly involves freight and handling charges paid by the dealer for the goods purchased. In this case, the clear finding of the lower authorities including the Tribunal is that in some cases the sale price is below the purchase price seen in the purchase invoice. So