2013 (10) TMI 1553 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of Section 11 of the Karnataka Value Added Tax Act, 2003.
2. Entitlement of the appellant-unit to benefits under Section 20(2) of the Act.
3. Compliance with Rule 130-A(1) of KVAT Rules, 2005.
4. Eligibility for refund of tax on inputs as per Section 20(2) read with Rule 130-A.
5. Grounds for remanding the case to the AA for examining the nexus between inputs purchased and the activities of the appellant-unit.
6. Final order.

Summary:

Issue 1: Applicability of Section 11 of the Act
The Tribunal determined that Section 20(2) of the Karnataka Value Added Tax Act, 2003 is a 'Stand Alone' provision independent of Section 11. The appellant-unit, engaged in Information Technology Enabled Services (ITES) and Software Development, falls outside the ambit of Section 11. The AA's invocation of Section 11(a)(3) to deny the refund claim was incorrect. Section 20(2) provides for refund of input tax to SEZ Units without the conditions stipulated in Section 11.

Issue 2: Entitlement to Benefits under Section 20(2)
The appellant-unit, recognized as a SEZ Unit by the Development Commissioner, is entitled to the benefits under Section 20(2) of the Act. The SEZ Act, 2005, which overrides other laws, supports this entitlement. The Tribunal emphasized that Section 20(2) does not require the SEZ Units to be engaged in activities involving 'goods' as output.

Issue 3: Compliance with Rule 130-A(1) of KVAT Rules
The appellant-unit satisfies the conditions under Rule 130-A(1)(b) and (c) of KVAT Rules, 2005. The unit is engaged in Software Development/Software Application Management and operates within the processing area of the SEZ. The Tribunal analyzed various expressions like 'manufacture', 'production', 'processing', etc., concluding that the appellant's activities fall within these definitions.

Issue 4: Eligibility for Refund of Tax on Inputs
The appellant-unit is eligible for a refund of tax paid on inputs used in its business activities. The Tribunal noted that the definition of 'input' under Section 2(19) of the Act includes goods used for any business purpose. The appellant's activities in Software Development/Software Application Management qualify for the refund under Section 20(2) read with Rule 130-A.

Issue 5: Grounds for Remanding the Case
The Tribunal remanded the case to the AA for the limited purpose of quantifying the refund amount. The appellant must provide a detailed statement of purchases and their purposes as required under Rule 130-A(3). The AA is to verify the nexus between the inputs purchased and the appellant's business activities before granting the refund.

Final Order
1. All thirty-one appeals are allowed.
2. The appellant-unit is eligible for a refund of tax paid on inputs used in its business activities as per Section 20(2) and Rule 130-A(1).
3. The impugned orders of the FAA are set aside.
4. The reassessment orders of the AA are set aside, and the matter is remitted to the AA for quantifying the refund amount.
5. The appellant is directed to submit the statement of purchases for the refund claim.
6. The Registrar of the Tribunal is directed to comply with Regulation 53(b) of Chapter IX of Karnataka Appellate Tribunal Regulations, 1979.
7. The Office is directed to send back the lower authorities' records within 15 days.