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2007 (10) TMI 556 - HC - VAT and Sales TaxFormat for credit notes and debit notes - Held that - The rule-making authority, entitled to prescribe the format of a credit note or a debit note, could not have incorporated such a prescription as a part of the rule itself is obviously not a contention pressed forth by the petitioner. In such circumstances, where section 41 of the Act provides that the format of the credit note/debit note will be as is prescribed, and it is so prescribed, there cannot be a contention that the note forming part of form No. 9 is ultra vires section 41 of the Act. The contention is misconceived and untenable. Once the challenge against the note forming part of form No. 9 of the Rules is repelled, it is not for this court to consider the correctness of the order of assessment, which has also been challenged in the writ petition. It is for the petitioner to prosecute the alternate remedies under the statute as against exhibit P4 order. The right of the petitioner in that regard is left open. The challenge against the note in form No. 9 of the Rules is repelled. W.P. dismissed.
Issues Involved
1. Validity of the note forming part of Form No. 9 in the Kerala Value Added Tax Rules, 2005. 2. Challenge against the order of assessment for the months of April, May, and June 2006. Detailed Analysis 1. Validity of the Note Forming Part of Form No. 9 in the Kerala Value Added Tax Rules, 2005 The principal challenge in this writ petition is regarding the note forming part of Form No. 9 in the Kerala Value Added Tax Rules, 2005, which prescribes the format for credit notes and debit notes exchanged between a selling dealer and a purchasing dealer when goods are returned. The petitioner contends that the note is invalid, inoperative, and unenforceable to the extent it specifies that every credit note must bear a corresponding debit note and vice versa, arguing that this is contrary to Section 41(1) of the Kerala Value Added Tax Act, 2003. The court considered the petitioner's argument that the note appended to Form No. 9 is ultra vires Section 41 of the Act. Form No. 9 is a common form for both credit and debit notes, requiring specific details such as the description of goods, quantity, sales/purchase bill number, date of return, amounts involved, related tax, and other particulars. The note in question states: 1. Every debit will have an equivalent credit and vice versa. 2. Every credit note would bear a corresponding debit note and vice versa. 3. Seller and buyer will exchange credit/debit notes mutually. 4. Time-limit as per Rules apply to only sales/purchase returns. The court found that the note is merely an affirmation of the particulars required in the form and that a credit note issued by the selling dealer must correspond with a debit note issued by the purchasing dealer to ensure the correctness and veracity of the transaction. The court held that the requirement for corresponding credit and debit notes is not an onerous provision but a necessary one for verifying claims of returned goods. The contention that the note is ultra vires Section 41 and Rule 59 of the Rules was found to be misconceived and untenable. 2. Challenge Against the Order of Assessment for the Months of April, May, and June 2006 The petitioner also challenged the order of assessment passed by the assessing authority for the months of April, May, and June 2006. The court noted that such an order is appealable and typically would not be entertained unless there are extraordinary circumstances. The assessment order was based on the petitioner's failure to produce corresponding debit notes for the credit notes issued, which led to the rejection of the entire input tax claim on sales returns. The court observed that the assessing authority had granted the petitioner an opportunity to produce the debit notes during the personal hearing. Despite having nearly a year to produce the debit notes, the petitioner failed to do so. The court emphasized that mere filing of credit notes is insufficient for claiming exemptions on account of returned goods; corresponding debit notes are necessary to ascertain the actual return of goods. The court reiterated that Section 41 of the Act, which enables a selling dealer to claim a credit for a portion of the input tax when goods are returned, is a beneficial provision. It allows for the reversal of a taxable event, provided certain conditions are met, including the issuance of corresponding credit and debit notes. The court found that the format prescribed in Form No. 9 is consistent with the requirements of Section 41 and Rule 59 of the Rules. Conclusion The court dismissed the writ petition, finding it bereft of merits. The challenge against the note forming part of Form No. 9 was repelled, and the petitioner was advised to pursue alternate remedies under the statute regarding the order of assessment. The court concluded that the note in Form No. 9 is in consonance with Section 41 of the Act and is not ultra vires.
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