By C. B. Thakar Advocate, G. G. Goyal, Janak Vaghani, Chartered Accountants
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VAT-Sale – Supply of Deep Freezers – By Ice Creame Manufacturing Company To Its Distributors Against Deposit – Up to full value of Cost- To be Adjusted Against Wear and Tear- In Four Equal Annual Instilments – Amounts To Sale – And Liable to Pay Tax – As well As Eligible to Input Tax Credit of Tax Paid on Purchase of Deep Freezers – The Kerala Value Added Tax Act, 2003.
Facts:
The petitioner company is engaged in manufacturing and sale of ice cream made purchase of deep freezers as an incentive and delivered same to the distributors against collection of security deposit almost equal to the value of deep freezers from each distributors. The assessing authority during the assessment for the years 2005-2006 and 2008-2009 treated such delivery of deep freezers as sale and levied tax thereon and did not grant input tax credit of tax paid on purchase of it being capital goods. The appellate authority as well as the Tribunal confirmed the assessment orders. The petitioner company filed revision petition before the Kerala High Court against such assessment orders.
Held :
The High Court rejected contention of the petitioner that there is no sale of deep freezers to the distributors because in fact it is a sale on deferred payment basis and the cost is recovered at 25 % each for the four years from the date of delivery. The transaction is a pure sale but on credit basis against payment in four installments.
As regards claim of input tax credit, the High court held that Deep freezers purchased and delivered are used for storage of ice cream by the distributors, and so much so, were capital goods for them and trading goods for the petitioner, who has purchased and sold the same to the distributors and is eligible to claim input tax credit on purchase thereof. Accordingly, the High Court allowed revision petition partly by directing assessing authority to grant input tax credit as per provisions of the law.
