2012 (6) TMI 759 - HC - VAT and Sales Tax

Whether the Appellate Tribunal was correct in law in reversing the 1st Appellate Order and OTRev.37 of 2012 confirming the denial of input tax credit made in Annexure A order on the purchases particularly considering the fact that the entire purchases are made only from M/s. Malabar Cements India Limited after payment of tax and the purchases are supported with tax suffered invoices issued by the supplier? Whether on the facts and circumstances of the case the Annexure A and C orders of the Authorities below to the extent it demands levy of tax on the estimated turnover without giving input tax credit on the purchases supported with proper invoice is arbitrary and illegal? Held that - The dealer has claimed in the revision that the purchases are supported by tax suffered invoices issued by the supplier as evidenced by the first question of law raised. Admittedly purchases were suppressed in the books of accounts as also the returns and the explanation offered has been rejected both by the original authority as well as the first appellate authority. Dealer/revision petitioner has not thought it fit to challenge the said findings. It was the State who was before the Tribunal challenging the grant of input tax credit by the first appellate authority. The scheme of the Act as noticed above would require the input tax credit to be claimed along with the return supported by tax suffered invoices and the quantum of eligible credit being determinable as reflected from the books of accounts. The assessee has admittedly not disclosed the transaction in his books of OTRev.37 of 2012 accounts or his return nor has he filed any revised return. The fact that the purchases were made from the Government Company as noticed earlier does not automatically entitle a dealer to claim input tax credit. And if the purchases are tax suffered; input tax credit will have to be claimed and availed of as per the provisions of the Act. On the finding that there is no such attempt made by the dealer and on the further ground that the dealer has suppressed his turnover both the questions of law are answered against the assessee/revision petitioner and in favour of the Revenue. OT Revision is hence rejected.

Summary

Issues:
1. Denial of input tax credit on suppressed purchases.
2. Validity of demanding tax on estimated turnover without granting input tax credit.
3. Interpretation of provisions of the Kerala Value Added Tax Act regarding input tax credit.

Analysis:
1. The case involved a revision petitioner engaged in the business of Cement dealership under the Kerala Value Added Tax Act. The petitioner failed to reflect certain purchases of Cement in the returns, leading to a notice for best judgment assessment. The assessment was completed with additions to account for the unaccounted purchases and turnover, including a Gross Profit estimate and further additions. The appellate authorities confirmed the additions but directed the Assessing Officer to grant input tax credit for suppressed purchases from a registered dealer, which was a Government undertaking. However, the Tribunal reversed this decision, disallowing the input tax credit based on previous court decisions and statutory provisions.

2. The revision petitioner raised legal questions challenging the Tribunal's decision, primarily questioning the denial of input tax credit on purchases made from the Government undertaking and the validity of demanding tax on estimated turnover without granting input tax credit on supported purchases. The petitioner argued that since the purchases were from a tax-suffered source with proper invoices, input tax credit should be allowed, emphasizing compliance with statutory provisions.

3. The court analyzed the provisions of the Kerala Value Added Tax Act related to input tax credit, emphasizing the importance of maintaining accurate accounts and records for determining the quantum of input tax credit. The court highlighted that the claim for input tax credit must be supported by tax-suffered invoices and the quantum should be determinable from the books of accounts. The court also referred to a Division Bench judgment emphasizing strict compliance with statutory provisions for granting benefits like input tax credit.

In conclusion, the court rejected the revision petition, emphasizing that the dealer's failure to disclose suppressed purchases in the books of accounts and returns, along with the absence of a claim for input tax credit as per statutory provisions, led to the denial of input tax credit. The court upheld the Tribunal's decision, highlighting the importance of strict compliance with the provisions of the Act for availing benefits like input tax credit.