IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN TUESDAY, THE 19TH OCTOBER 2010 / 27TH ASWINA 1932 ST.Rev..No. 280 of 2009() ------------------------- TA.51/2009 of DY.CMRR.KERALA AGRL.IT & STAT,EKM. .................... REVISION PETITIONER: -------------------- SMT.SINI BENSON, PROPRIETRIX, MEDIHAUXE INTERNATIONAL, NETAJI ROAD, EDAPPALLY. BY ADV. SRI.E.P.GOVINDAN RESPONDENT(S): --------------- STATE OF KERALA, REP. BY THE SECRETARY, TAXES, DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. BY G.P. SRI. MOHAMMED RAFEEQ THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 19/10/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR, & K. SURENDRA MOHAN, JJ. -------------------------------------------- S. T. Rev. No. 280 of 2009 -------------------------------------------- Dated this the 19th day of October, 2010 JUDGMENT Ramachandran Nair, J. The question raised is whether the Tribunal was justified in declining petitioner's claim for exemption on the turnover representing value of medicines supplied to patients free of cost. We have heard counsel appearing for the petitioner and Government Pleader for the respondent. 2. We find that medicines said to have been supplied free of cost to patients were originally procured by the petitioner on paying purchase cost. However, since sale price is not collected, but supply was made free of cost to patients, manufacturer reimbursed the purchase cost originally collected from the petitioner by sending credit notes. The contention of the petitioner is that documents are available to substantiate their supply and that the credit notes received are nothing but return of purchase cost and so much so there is no sale. However, Government Pleader's contention is that free supply is not STRV 280 of 2009 2 proved and if at all free supply is proved, so far as the petitioner is concerned, she got payment from the manufacturer and since consideration for the supply is received from the manufacturer the transaction is sale. What we find is that reimbursement by the manufacturer is only purchase cost, that means sale if at all taken place is without charging any margin. Since the department has no case that claim of supply of medicines to patients free of cost is not genuine, it is a case of reimbursement of sale price without margin by the manufacturer to the petitioner. Therefore there is no scope for making any addition towards gross profit. However, We feel that assessment is possible only to the extent of credit notes amount received representing sale consideration reimbursed to the petitioner by the manufacturer. We therefore allow the revision in part by deleting GP addition to the turnover but by sustaining the assessment on the credit note amount pertaining to the transaction. (C.N.RAMACHANDRAN NAIR) Judge. (K. SURENDRA MOHAN) kk Judge. STRV 280 of 2009 3