2013 (2) TMI 187 - HC - VAT and Sales Tax

Input Tax Credit under Section 11(5) of KVAT Act - petitioner purchased substantial quantity of scrap from various offices of the BSNL - inability of BSNL to issue tax invoice - petitioner claimed the benefit of Circular No.18433/B1/2008/TD dated 30th August, 2008 BSNL dind availed the invoices as that they did not have a registration under the KVAT Act at the relevant point of time - Held that - Rightly pointed out by the Government Pleader that the circular relied on by petitioner is applicable only in respect of sales effected by the Government departments, local authorities and autonomous bodies. Admittedly, BSNL is a company incorporated under the provisions of the Companies Act, 1956 and a company cannot be described as an autonomous body to be covered by the circular relied on by the petitioner. The petitioner contention that that when the Government has chosen to extend the benefit to the sales effected by the Government departments, local bodies and autonomous bodies, there is no reason to deny similar benefit to the petitioner who has effected purchases from a Government company is not acceptable as the question whether such a benefit should be extended to purchases from a Government Company, is a matter for the Government itself to consider, as it is in the realm of a policy decision. Thus going by the return filed and the replies submitted by the petitioner, he effected purchases not from BSNL but from MSTC. Therefore, according to the learned counsel, the claim now made by the petitioner that he effected purchase from BSNL is contrary to his own returns. Although it is true that petitioner seems to have made such an incorrect claim, still as already stated, MSTC itself has filed an affidavit before this Court that it was only an agent of BSNL. Similarly, BSNL has also taken a positive stand before this Court that purchases were effected from them. Thus it will be open to the petitioner to move the Commissioner of Commercial Taxes within two weeks from today for a clarification of Circular & if the petitioner moves for such a clarification and obtains a favourable order, it will be open to him to produce the same before the first respondent who will then consider the claim and pass appropriate consequential orders & if the petitioner does not succeed in obtaining favourable orders from the Commissioner as directed above, it will be open to respondents to proceed with the recovery action, on the expiry of the four months period.

Summary

Issues:
Challenge to assessment order under the KVAT Act for assessment years 2006-2007; Dispute over Input Tax Credit claim; Interpretation of Section 11(5) of KVAT Act; Application of Circular No.18433/B1/2008/TD dated 30th August, 2008; Clarification on purchases from BSNL or MSTC; Revenue recovery notice challenge.

Analysis:
The petitioner challenged Ext.P9, an assessment order under the KVAT Act for the assessment years 2006-2007, claiming Input Tax Credit for purchasing scrap from BSNL. The petitioner contended that they were eligible for Input Tax Credit under Section 11(5) of the KVAT Act but were denied due to the absence of proper tax invoices. The respondents argued that the petitioner actually purchased from MSTC, not BSNL, based on the returns filed. However, BSNL confirmed the purchases, and documents like delivery orders and invoices supported the petitioner's claim of purchasing from BSNL.

The dispute centered on the interpretation of Section 11(5)(m) of the KVAT Act, which disallows Input Tax Credit without proper tax invoices. The petitioner relied on Circular No.18433/B1/2008/TD, arguing that BSNL's inability to issue tax invoices was due to lack of registration under the KVAT Act. The circular allowed cash receipts from certain entities to be treated as tax invoices for refund purposes. The court noted that the circular applied to government departments, local authorities, and autonomous bodies, not companies like BSNL. The decision to extend the circular's benefit to purchases from government companies was deemed a policy matter for the government to decide.

The court directed the petitioner to seek clarification from the Commissioner of Commercial Taxes regarding the circular and, if favorable, to present it to the assessing authority. If the clarification supported the petitioner's claim, the assessing authority was instructed to reconsider the Input Tax Credit eligibility. Revenue recovery proceedings were deferred for four months to allow the petitioner time to seek clarification. If the petitioner failed to obtain favorable orders, the respondents were permitted to proceed with recovery actions.