2012 (8) TMI 1061 - HC - VAT and Sales Tax

Summary

Issues involved: Challenge to Tribunal's orders affirming Assessing Officer's decision, applicability of Section 6(5) of Kerala Value Added Tax Act, 2003, best judgment assessment, denial of input tax credit, liability under Section 6(1) vs. Section 6(5), retrospective effect of proviso introduced by Kerala Finance Act, 2011, claim of input tax credit conflicting with presumptive dealer status.

The assessee, a dealer in ice creams, challenged the Tribunal's orders affirming the Assessing Officer's decision for the years 2006-07 and 2007-08 under the Kerala Value Added Tax Act, 2003. The issue revolved around the applicability of Section 6(5) of the Act, which provides for presumptive tax payment at 0.5% for dealers with turnover below Rs. 50 lakhs. The Assessing Officer rejected the assessee's returns due to suppression of purchase, resulting in the entire turnover being assessed as it crossed the Rs. 50 lakhs limit for both years.

The first appellate authority modified the additions made by the Assessing Officer, but upheld the rejection of books of accounts and the best judgment assessment. The Tribunal also upheld these decisions and denied the input tax credit claimed by the assessee. The core issue was the legality of the best judgment assessment based on detected offences and the denial of the benefit of paying tax under Section 6(5) of the Act.

The claim for continuing as a presumptive dealer conflicted with the request for input tax credit, as per the Act's provisions. The Tribunal found that the suppression detected would still exceed the turnover limit under Section 6(5), justifying the best judgment assessment. The assessing authority's exercise of power in making the assessment was deemed proper and within jurisdiction, following principles outlined by the Supreme Court.

Regarding liability under Section 6(1) versus Section 6(5), the turnover assessed by the authority, including additions for omissions and suppressions, determined the assessee's tax status. The turnover exceeding the Section 6(5) limit necessitated the assessee's exclusion from the presumptive net. The retrospective proviso introduced by the Kerala Finance Act, 2011, supported this interpretation, emphasizing the consequences of detected offences on tax liability.

The claim for input tax credit was deemed invalid due to the detected suppressions, as established in previous court decisions. The case of Paul K.V. highlighted the necessity for compliance with Act provisions when transitioning from presumptive tax to value-added tax. The distinction was made between cases where turnover limit breaches were from suppression versus book discrepancies.

The issue of penalty proceedings under Section 67 was raised by the assessee but was not challenged in the revisions. The Court rejected the revisions, concluding that they lacked merit based on the assessments and legal interpretations presented.