2015 (8) TMI 1346 - HC - VAT and Sales Tax

Entitlement to the benefit of the amendment made by the Kerala Finance Act, 2014, to the extent it relates to input tax credit - Held that - It is pointed out that Section 25 C has been introduced in the K.V.A.T. Act through the Kerala Finance Act, 2014, only with effect from 1.4.2005. The relevant assessment year in so far as this revision is concerned is 2008-09. The retrospective amendment, as made by the introduction of Section 25 C, is a special provision regarding assessment of dealers paying presumptive tax. The said provision provides that notwithstanding anything contained in sub-section (4) of Section 11 or sub-section (2) of Section 12, if any assessment or other proceeding is initiated by the assessing authority denying the eligibility of a dealer to pay presumptive tax for the violation of conditions enumerated in sub-section (5) of Section 6, such dealer shall be granted input tax credit or special rebate, as the case may be. That being so, even if the revision petitioner had violated the conditions enumerated in sub-section (5) of Section 6; that is to say, the import of goods from another State; he will continue to enjoy the benefit of input tax credit. Hence, the orders impugned have to be modified and the assessing authority is directed hereby to modify the assessment order by giving input tax credit on the basis of the aforenoted amendment; however, after verifying the invoices produced by the assessee. Such is the order which ought to have been, and, was required to be passed in this case under Section 63 of the Act. Hence, this revision is ordered directing compliance of the aforesaid in letter and spirit.

Summary

Issues:
1. Interpretation of the Kerala Value Added Tax Act, 2003 regarding input tax credit eligibility.
2. Application of the retrospective amendment introduced by the Kerala Finance Act, 2014.
3. Assessment of dealers paying presumptive tax under Section 25 C of the K.V.A.T. Act.

Analysis:
The judgment by the High Court of Kerala, delivered by Justice Thottathil B.Radhakrishnan, addressed the issue of input tax credit eligibility under the Kerala Value Added Tax Act, 2003. The revision petitioner argued for the benefit of an amendment introduced by the Kerala Finance Act, 2014, specifically focusing on Section 25 C. This section, effective from 1.4.2005, provides a special provision for the assessment of dealers paying presumptive tax. It states that if an assessment is initiated denying a dealer the eligibility for presumptive tax due to violations, the dealer shall be granted input tax credit or special rebate. The court held that even if the petitioner violated conditions related to the import of goods from another state, they are entitled to the benefit of input tax credit under the retrospective amendment. The court directed the assessing authority to modify the assessment order by granting input tax credit based on the mentioned amendment, subject to verification of invoices produced by the assessee.

The judgment also delved into the retrospective nature of the amendment introduced by the Kerala Finance Act, 2014. The court emphasized that the introduction of Section 25 C in the K.V.A.T. Act was a significant move, providing relief to dealers paying presumptive tax. Despite findings by authorities below, the court highlighted the importance of granting input tax credit or special rebate to dealers facing assessment issues due to violations of specified conditions. This retrospective amendment aimed to ensure that dealers, even if found in violation, could still benefit from input tax credit, thereby promoting fairness and adherence to the law.

Furthermore, the court analyzed the assessment process for dealers paying presumptive tax under Section 25 C of the K.V.A.T. Act. It clarified that the assessing authority must adhere to the provisions of the Act, especially when dealing with cases where eligibility for presumptive tax is denied based on violations. The court's decision to direct the modifying of the assessment order to include input tax credit highlighted the importance of following the law and ensuring that dealers receive the benefits they are entitled to under the relevant provisions. The judgment underscored the need for proper verification of invoices to uphold the integrity of the assessment process and maintain compliance with the law.