2014 (7) TMI 577 - HC - VAT and Sales Tax

Benefit of deduction of tax - Whether the assessee is entitled to the benefit of deduction of tax from the total value of the bills, when in the bill the assessee has not shown the value of the cost price of the goods and the tax payable thereon separately - Held that - in the bills and invoices raised by the assessee, the value of the goods is not mentioned, the rate of tax on the said value of goods and the amount of tax is not mentioned. The total is not arrived at by adding the value of goods and tax. On the contrary in the bills and invoices a particular amount is claimed, in the bottom, a seal is put saying that the tax is collected at 12.5 per cent and the amount of tax. That is not what is prescribed under the law. If the assessee could mention the rate of tax and the amount of tax payable, he should have mentioned the same after mentioning the value of the goods and then he should have added. Then only he would be entitled to the benefit of deduction of tax from the total value mentioned in the bill. His mentioning in the books of account in a separate column, the value of the goods and the value of the tax cannot be given due weightage because what should be mentioned in the books of accounts is what is mentioned in the bill. When in the bill, he has not mentioned the value of goods and value of tax separately, the entries in the books of accounts looses its weight - assessing authority was justified in holding that the appellant was not entitled to the benefit of tax deduction, out of the total amount of tax collected in each bill. The lower appellate court instead of looking into the facts carefully was more concerned about the judgments, which are relied upon, where no law is laid down and where they were deciding the case on facts. - Decided against assessee.

Summary

Issues:
1. Interpretation of section 9(1) of the KVAT Act, 2003 and rule 29(1) of the KVAT Rules, 2005 regarding tax collection in tax invoices.
2. Whether the assessee is entitled to deduction of tax from the total value of bills if the value of goods and tax payable are not separately shown in the invoice.
3. Application of judgments and legislative provisions in determining tax collection and deductions.

Analysis:

1. The appeals were filed against an order by the Additional Commissioner of Commercial Taxes under section 64(1) of the KVAT Act, 2003. The issue revolved around the assessee's failure to collect tax separately in tax invoices as required under section 9(1) of the Act and rule 29(1) of the Rules for a specific tax period. The assessing authority issued a reassessment notice due to discrepancies in tax collection and input tax credit claims by the assessee.

2. The appellate authority, after considering relevant provisions and judgments, held that the deduction on taxes collected should be allowed based on the tax shown in the books of accounts. The authority directed the assessing authority to recompute taxable income and tax payable accordingly, issuing a revised demand notice.

3. The revisional authority, exercising power under section 64(1) of the KVAT Act, disagreed with the appellate authority's decision. It emphasized the necessity of separately charging value-added tax in tax invoices for admissible deductions. The revisional authority set aside the appellate order and reinstated the original assessment, leading to the assessee's appeal before the High Court.

4. The High Court considered the arguments presented by both parties. The appellant contended that the tax was clearly mentioned in bills and accounts, complying with legal requirements. However, the revisional authority's decision was supported by the Government Advocate, emphasizing the importance of correct tax invoicing for deductions.

5. The Court reframed the substantial question of law to address whether the assessee is entitled to tax deductions if the value of goods and tax payable are not separately indicated in the invoice. Section 9 of the Act and rule 29 of the Rules were analyzed to determine the invoicing requirements for claiming deductions.

6. The Court concluded that the assessee failed to meet the invoicing standards as prescribed by law. The absence of separate mention of goods value and tax amount in the invoices led to the denial of tax deductions. The revisional authority's decision to set aside the appellate order was upheld, stating that the assessing authority was justified in denying the tax deduction benefit based on incorrect invoicing practices.

7. The Court dismissed the appeal, affirming the revisional authority's decision as lawful and in the interest of revenue. The judgment highlighted the importance of adhering to invoicing regulations for tax deductions and upheld the denial of benefits due to non-compliance with invoicing requirements.