2013 (4) TMI 48 - HC - VAT and Sales Tax

KVAT Act - Refund of the excess input tax paid - excess amount claimed by the petitioner is on account of the fact that they sold the goods at a price lower than the price estimated at the check post for the purpose of advance tax - Held that - The special rebate available u/s 12 of the Act shall not exceed the output tax payable in respect of such goods or goods manufactured out of such goods. If that be so, the claim made by the petitioner, does not appear to be tenable. Unable to accept this argument of the counsel for the reason that even though purchase value is calculated including the elements specified in Section 2(n) of the Entry Tax Act, the final figure represents the purchase value only. It is on that basis that entry tax is determined. If that be so, for the purpose of determining whether sale of the commodity was at a reduced rate, it is always open to the respondents to reckon the purchase value as determined in terms of Section 2(n) of the Entry Tax Act. In so far as this case is concerned, it is on that basis, it has be concluded that the sale has been at a reduced rate - rejection of the petitioner s application for refund confirmed.

Summary

Issues:
1. Rejection of refund claim for excess input tax paid by the petitioner.
2. Interpretation of the 4th proviso to Section 12 of the KVAT Act regarding special rebates in cases of goods sold at a reduced rate.

Analysis:
1. The petitioner, a timber dealer, filed a refund application for the excess input tax paid in the year 2006-2007, which was rejected by the authorities. The petitioner challenged this rejection through a writ petition, claiming that the tax paid on entry of goods into Kerala should be credited and refunded. The respondent contended that the claim was untenable under the 4th proviso to section 12 of the KVAT Act.

2. The respondent argued that the petitioner paid advance tax based on the invoice price plus additional expenses, which amounted to approximately 107% of the invoice price. Subsequently, when the timber was sold at a reduced rate, the excess amount claimed by the petitioner was due to selling the goods below the estimated price used for calculating advance tax. The 4th proviso to Section 12 restricts special rebates when goods are sold at a reduced rate.

3. The court examined the 4th proviso to Section 12, which limits special rebates when goods are sold at a reduced rate. The petitioner's argument that entry tax is based on the purchase value, including various elements, was rejected. The court clarified that even though the purchase value includes multiple components, it ultimately represents the purchase value alone for determining entry tax. Therefore, based on this calculation, it was determined that the goods were sold at a reduced rate, justifying the rejection of the refund application.

4. Consequently, the court held that the rejection of the petitioner's refund application was not illegal, and there was no justification for interference in the writ petition. As a result, the writ petition failed, and the court dismissed it, upholding the decision to reject the refund claim for the excess input tax paid by the petitioner in this case.