2018 (6) TMI 1704 - HC - VAT and Sales Tax

Grant of Special Rebate - Section 12 of the Kerala Value Added Tax Act, 2003 - prohibition applicable to presumptive regime - whether the tax payable by the assessee on the suppressed purchase value under Section 6(2) of of the Act of 2003 is liable to special rebate under Section 12 of the said Act? - HELD THAT - There are no analogy that can be drawn from Venus Marketing. Venus Marketing was with respect to the input tax credit claimed by a presumptive dealer. With respect to presumptive dealers, there is a specific prohibition, in claiming input tax credit under Section 11 of the Act of 2003. In the case of persons, who switch over from the presumptive regime to regular tax payment, there is an enabling provision under Rule 12 of the Kerala Value Added Tax Rules, 2005. An assessee, who is under the presumptive regime is to make an application pointing out his intention to changeover and from that time onward the assessee is entitled to input tax credit. Even when such changeover is allowed in the course of an year, the presumptive tax paid before the changeover is not entitled to input tax credit. The procedural mandate distinguishes input tax credit allowable under Section 11 from special rebate deductible under Section 12. The claim under Section 11 has to be supported by invoices; which in the instance of best judgment were suppressed and later detected. While input tax is a claim to be made by the assessee, special rebate is a deduction permissible in the return itself. Hence the assessing authority when determining the turnover and levying tax is obliged to grant the deduction to tax payable under sub-section (2) of Section 6 as special rebate. The assessee is entitled to special rebate on the purchases added to the turnover returned, on best judgment assessment - the questions of law is answered in favour of the assessee and against the revenue - Revision dismissed.

Summary

Issues:
1. Whether special rebate under Section 12 of the Kerala Value Added Tax Act can be permitted for computing net tax payable by the assessee in cases of additions made on purchase suppressions from unregistered dealers?
2. Whether the decision in Sulthan Gold International v. State of Kerala requires reconsideration?

Analysis:
1. The assessment in question pertains to the year 2006-2007 where suppression was detected in unaccounted sales, leading to additions in the total turnover. The issue revolves around whether tax payable on suppressed purchase value under Section 6(2) of the Act of 2003 is eligible for special rebate under Section 12. The court relied on the precedent set by Sulthan Gold International, emphasizing that the provision does not specifically address best judgment assessments. The court rejected the argument that special rebate cannot be granted in cases of detected suppression, asserting that the net tax payable should consider the total tax liability on sales and purchases minus the tax on purchases.

2. The State contended that the words 'tax paid' in the provision should be strictly interpreted, disallowing special rebate in cases of best judgment assessments post-suppression detection. However, the court disagreed, stating that undue significance should not be placed on these words. The court upheld the decision in Sulthan Gold International, highlighting that the provision does not prohibit special rebate in such scenarios. The court differentiated this case from Venus Marketing, which dealt with input tax credit for presumptive dealers, emphasizing that no such prohibition exists for special rebate under Section 12.

3. The State further relied on Mohammed Haji v. State of Kerala and other judgments to argue against granting special rebate post-suppression detection. However, the court distinguished input tax credit under Section 11 from special rebate under Section 12, noting that the former requires strict procedural compliance. The court concluded that the assessee is entitled to special rebate on added purchases in best judgment assessments, affirming the decision in Sulthan Gold International and ruling in favor of the assessee, dismissing the revision.