2013 (1) TMI 194 - HC - VAT and Sales Tax

KVAT Act - Section 2(xxii) of the KVAT Act - Input Tax Credit - Whether a dealer, who is having turn over less than the taxable limit, does require the permission of the departmental authorities to collect tax - Whether the persons like the petitioner, who otherwise satisfy the definition of the term importer under Section 2(xxii) of the KVAT Act, does require registration under the CST Act to be an importer as defined thereunder Registration u/s 7 Assessee made only Inter-State purchases and not Inter-State sales - The petitioner had collected tax from customers and paid over to the revenue along with return, since the petitioner had made interstate purchase of goods for local sale, during the year Held that - Both sub sections 1 and 2 of Section 7 do not give an idea that petitioner/ dealer is liable to take out registration under the CST Act. This is more so, when there is no case for the respondent that the petitioner has effected any Inter-State purchases, paying lesser rate of tax under the CST Act or that, the petitioner has effected any Inter-State sales. The petitioner is entitled to have the benefit of Input Tax Credit , in so far as he happens to be an importer as defined under Section 2(xxii) of the KVAT Act and there is absolutely nothing wrong for having collected and remitted the tax, without having any registration under the CST Act. In favour of assessee

Summary

Issues:
1. Requirement of permission for a dealer with turnover below taxable limit to collect tax.
2. Necessity of registration under CST Act for individuals satisfying the definition of 'importer'.
3. Justification for penalty due to lack of CST registration.

Analysis:
1. The petitioner, a registered dealer under the KVAT Act with turnover below the taxable limit, collected tax without permission. The respondent issued notices questioning this action. The petitioner argued satisfying the definition of 'importer' under Section 2(xxii) of the KVAT Act exempts the need for permission. Despite objections, the respondent rejected the claim for Input Tax Credit and imposed penalties.

2. The petitioner contended that under Section 6(1) of the KVAT Act, every importer is liable to pay tax, regardless of turnover. The definition of 'importer' was crucial. The respondent's assertion of needing CST registration for tax payment was challenged as Section 6(1) did not mandate registration. The petitioner's interpretation was supported by legal provisions.

3. The punishment for lack of CST registration was examined. Section 7 of the CST Act highlighted registration requirements. Subsections (1) and (2) were analyzed. The court clarified that Subsection 2 allows dealers not liable for CST tax to apply for registration at their discretion. The absence of Inter-State sales by the petitioner further weakened the respondent's penalty imposition.

4. The court referenced a previous case where a similar issue was decided in favor of the assessee. The judgment favored the petitioner on the first issue. The court set aside the orders denying Input Tax Credit and imposing penalties, declaring the petitioner entitled to the credit as an 'importer'. The respondent was directed to reevaluate the claim within three months.

In conclusion, the court allowed the writ petition, emphasizing the petitioner's entitlement to Input Tax Credit and dismissing the penalties. The judgment clarified legal obligations regarding tax collection, registration requirements, and penalty justifications under the relevant Acts.