2016 (5) TMI 826 - HC - VAT and Sales Tax

Binding effect of circular dated 7.7.2008 vide No.VAT/CR-31/2008-09 and interpretation thereof - Return filed beyond the period of six months showing the additional tax liability - Levying of penalty and interest - Held that - circular transpires that whenever the word is any additional tax liability it would mean additional net tax liability because the moment there is use of the word additional , it would mean that either the tax is already paid, but shortly paid or even after the credit of input tax, the further liability of the tax remains which is required to be paid by the return. The attempt to contend that it should be revised return only for the purpose of absolute additional tax liability and not to include the adjustments thereof with input credit, cannot be countenanced for the simple reason that whenever the matter pertains to payment of additional tax liability, it would always mean the credit or set off to be made of the tax already paid and the consequential amount of tax by way of additional tax liability. Therefore, if the credit or adjustment is to be given to the amount of tax already paid, there is no reason why the credit of input tax should not be adjusted against the tax liability and thereafter to arrive at the additional tax liability. In our view, the interpretation put forward on behalf of the Revenue to the circular dated 7.7.2008 cannot be accepted. Interpretation of view taken by this Court in the decision which have been referred to as that of the learned Single Judge and of the Division Bench in the Order - Held that - this Court did not find that even if the input tax credit is claimed for the respective tax period for which the return has been filed resulting into additional tax liability, then also input tax credit cannot be given adjustment thereof or would be unavailable. Therefore, the Revisional Authority has not properly considered the referred decision of this Court in State of Karnataka Vs. Centum Industries Private Limited, Bangalore 2015 (10) TMI 47 - KARNATAKA HIGH COURT . If the matter is examined in the light of the aforesaid two aspects and the reasons recorded by the Revisional Authority are considered, it is found that the order cannot be sustained in the eye of law. Therefore, it would be appropriate to refer the matter to the Revisional Authority for reconsideration thereof in the light of the observations made by this Court. - Appeal disposed of by way of remand

Summary

Issues:
1. Interpretation of circular regarding revised return under KVAT Act
2. Effect of previous court decisions on input tax credit claims in revised returns

Issue 1: Interpretation of circular regarding revised return under KVAT Act:
The case involved the filing of a return under the Karnataka Value Added Tax Act beyond the six-month period, showing additional tax liability. The Revisional Authority passed an order revising the Assessing Officer's decision. The main contention was the interpretation of a circular dated 7.7.2008, which stated that revised returns indicating additional tax liability should be accepted for re-assessment. The Revisional Authority argued that the circular did not include adjustments with input tax credit. However, the court disagreed, stating that any additional tax liability should consider adjustments with input tax credit. The court found the Revenue's interpretation of the circular to be incorrect.

Issue 2: Effect of previous court decisions on input tax credit claims in revised returns:
The court discussed previous court decisions related to input tax credit claims in revised returns. It referred to a case where the Single Judge upheld the permissibility of revised returns for additional tax liability. The Division Bench also supported this view in a subsequent judgment. Another case highlighted the importance of reflecting input tax credit claims in the respective tax period. The court emphasized that the Revisional Authority did not properly consider these precedents. Consequently, the court quashed the Revisional Authority's order and directed a fresh consideration based on the court's observations. The court also nullified any consequential orders based on the Revisional Authority's decision. The appeals were allowed without costs, and pending applications were disposed of accordingly.