2026-VIL-260-GAU
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VAT High Court Cases

Assam Value Added Tax Act, 2003 - Taxable turnover, Free samples as Trade discount - Petitioner provided free samples of medicines to retailers as a promotional activity. The authorities reassessed the petitioner's tax liability for the assessment years 2007-08 to 2009-10, including the value of the free samples in the taxable turnover – Whether the free samples can be treated as trade discount and excluded from the taxable turnover under Section 11 of the AVAT Act read with Rule 9(b) of the Assam VAT Rules – HELD – A free sample is a sample which is provided to the end customer free of cost for promotion of the product. On the other hand, a trade discount is a percentage reduction from the listed price, given to the intermediaries (wholesalers/retailers) for bulk purchase thereby reducing the invoice value. The free samples cannot be equated to trade discounts for the purpose of deduction from taxable turnover under Rule 9(b) of the AVAT Rules. While trade discounts are allowed as deductions, free samples provided for promotional purposes are not covered under this provision - The Government had issued a Notification dated 11.10.2006 clarifying that free supplies along with sale at the first point of sale in the State on MRP shall be deemed as sale and liable to tax on the MRP. This Notification is found to be a valid exercise of power under the AVAT Act to address the prevalent practice of providing free samples which were subsequently sold by retailers at MRP along with tax - the petitioner being in the trade of medicine ought to have known about the Notification dated 11.10.2006 which was holding the field at least till 31.10.2009. The petitioner never challenged the said notification till filing of the present proceedings in the year 2018. Under such circumstances also, the impugned notification cannot be interfered with - The writ petitions filed by the petitioner company challenging the reassessment orders imposing tax on the value of free samples provided to retailers are dismissed
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