2011 (7) TMI 1052 - HC - VAT and Sales Tax

Whether the Tribunal was justified in confirming disallowance of input tax credit claimed by the assessee for the year 2005-2006 under Section 11(1) of the Kerala Value Added Tax Act? Held that - In order to avail the benefit, petitioner has to get permission from the officer who grants it under sub-rule (8) on being satisfied after verifying Form 25A and the accounts furnished. In the absence of compliance of statutory formalities provided in the above Rules, petitioner was rightly declined input tax credit. So far as petitioner s contention that petitioner is entitled to input tax credit under Section 11(1) by virtue of assessment of the entire turnover for 2005-2006 at Schedule rate is concerned, is not acceptable because under Rule 12(8) there is no provision to grant input tax credit to dealers claiming benefit under Section 6(5) for any period prior to filing of Form No.25A even in cases where the dealer was denied the benefit claimed under Section 6(5) and assessed under Section 6(1) of the Act for the whole year. We, therefore, dismiss the revision case.

Issues involved:
1. Disallowance of input tax credit claimed by the assessee for the year 2005-2006 under Section 11(1) of the Kerala Value Added Tax Act.
2. Eligibility for input tax credit after detection of suppressed sales and consequent assessment made at the Schedule rate.
3. Compliance of sub-rules (7) and (8) of Rule 12 for claiming input tax credit on the opening stock held.

Issue 1: Disallowance of input tax credit under Section 11(1):
The High Court considered whether the Tribunal was justified in confirming the disallowance of input tax credit claimed by the assessee for the year 2005-2006 under Section 11(1) of the Kerala Value Added Tax Act. The assessee initially claimed a turnover of &8377; 44 lakhs but later revised it to &8377; 82.94 lakhs after detection of unaccounted sales. The Assessing Officer disallowed the input tax credit claim under Section 11(1) of the Act. The Court noted that input tax credit is available only to registered dealers paying tax under Section 6(1) of the Act, whereas the petitioner had paid presumptive tax under Section 6(5) and was not entitled to input tax credit. The Court held that the petitioner failed to comply with the necessary formalities and rules to claim input tax credit, ultimately dismissing the revision case.

Issue 2: Eligibility for input tax credit post-detection of suppressed sales:
The Court analyzed whether the petitioner could claim input tax credit after the detection of suppressed sales and subsequent assessment at the Schedule rate. The petitioner argued that once assessed at the Schedule rate, they became liable to pay tax under Section 6(1) and should be entitled to input tax credit. However, the Government Pleader contended that the petitioner, as a registered dealer paying tax under Section 6(5), could only claim input tax credit if compliant with the Rules. The Court referred to Rule 12(7) and (8), emphasizing the mandatory requirements for switching over to the payment scheme under Section 6(1) to claim input tax credit. Since the petitioner did not fulfill these requirements, the Court upheld the disallowance of input tax credit.

Issue 3: Compliance with Rule 12(7) and (8) for claiming input tax credit:
The Court deliberated on whether compliance with sub-rules (7) and (8) of Rule 12 was mandatory to claim input tax credit on the opening stock held. It was clarified that for dealers switching from presumptive tax under Section 6(5) to tax under Section 6(1), eligibility for input tax credit on the opening stock required adherence to the prescribed procedure. The Court highlighted that without submitting Form No.25A and necessary documents as per Rule 12(7), the petitioner could not claim input tax credit. As the petitioner did not follow the statutory formalities, the Court upheld the denial of input tax credit, emphasizing the importance of strict adherence to statutory provisions for granting benefits like input tax credit.

In conclusion, the High Court dismissed the revision case, upholding the disallowance of input tax credit claimed by the assessee for the year 2005-2006 under Section 11(1) of the Kerala Value Added Tax Act. The Court emphasized the significance of complying with statutory provisions and rules for claiming input tax credit, reiterating that benefits should be granted strictly in accordance with the Act and Rules, especially in cases involving tax evasion or suppression of sales.

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