ORDER :

S.V. Bhatti, J.

We have heard the learned Senior Advocate Mr. K. Srikumar, the learned Advocates Mr. Tomson T. Emmanuel, Mr. K.M. Firoz, Mr. V.P. Narayan, Mr. Premjith Nagendran, Mr. Anil D. Nair, and Smt. S.K. Devi for petitioners and Mr. Mohammed Rafiq, the learned Special Government Pleader (Taxes) for respondent.

2. On 27.02.2018, learned Single Judge, Mr. Justice P.B. Suresh Kumar, noticing that the fifth proviso to S.11 was not considered in Cement House v. State of Kerala, (2011) 38 VST 74 (Ker)); State of Kerala v. Syed Muhammed, 2016 (4) KLT 462 and Tenny Devassy v. State of Kerala, O.T.Rev.No.98/2012, referred W.P.(C) No.5467/2017 and two other petitions to Division Bench for examination of the issues noted therein. On 24.07.2020, a Division Bench of Mr. Justice K. Vinod Chandran and Mr. Justice T.R. Ravi referred the matters to a Full Bench, particularly because the views taken by the learned Judges in the Reference Order are inconsistent with the view taken in the three Division Bench judgments (a) Cement House v. State of Kerala; (b) State of Kerala v. Syed Muhammed and (c) Tenny Devassy v. State of Kerala. Hence, the matters are posted before the Full Bench.

2.1. W.P.(C) No.5467/2017 is treated as the representative case to appreciate the circumstances raising the question of law by us. The counsel appearing for the parties stated that the reference to circumstances in all the cases is unnecessary. Even if a slight variation in circumstances in other matters is present, still the question of law raised for consideration would be common in all the cases.

W.P.(C) No.5467/2017

3. The writ petitioner is a registered dealer under the Kerala Value Added Tax Act, 2003 (for short, ‘the Act’). The petitioner is a trader in cement. As per the trade practice, the suppliers extend discounts to buyers based on the purchases made by the dealers from the suppliers in an accounting year. The deductions, namely, turnover discount, target discount, additional discount, special discount etc., are allowable deductions from the sales price or the purchase price, as the case may be, subject to the value of goods paid by buyers is the amount less such discount. W.P.(C) No.5467/2017 is filed challenging reassessment order dated 24.01.2017 for return period 2013-14. During the return period, the dealer received cash discount from the suppliers based on the purchases the petitioner made from respective suppliers. The returns filed by the dealer, in regular course, are accepted. Subsequently, the 1st respondent issued a notice under S.25 of the Act proposing to revise the returns and complete the assessment on best judgment for the year 2013-14. The reason for reassessment is that a part of the sales turnover of the dealer has not undergone self–assessment and did not suffer value added tax. The reply of the dealer is that the cash credit or discount now proposed to be included in the turnover was on the purchases made by the dealer/petitioner. The respective suppliers/manufacturers paid tax on the gross amount shown in the tax invoice. The discount received on purchases by the dealer from the supplier, firstly, suffered tax at the hands of the supplier, and secondly, there is no concealment of turnover. The dealer’s reply was rejected, confirming the proposal to add the amount received by way of discount to total turnover and tax was demanded.

3.1. As part of the narrative, it is helpful to take note of the judgment dated 02.12.2015 of a learned Single Judge in W.P.(C) No.5077/2009 and batch who considered a few nuances of Value Added Tax and the obligation of the Revenue to test the cases on those principles. The portion relied on by the dealers are paragraphs 8 to 11, which read thus :

8. In my view, three factual situations can arise, and in the said situations, the course of action to be adopted by the assessing authority would vary based on the provisions of the KVAT Act.

9. Firstly, there cannot be an insistence on an automatic rever