2016 (11) TMI 1316 - HC - VAT and Sales Tax

Entitlement to partial rebate - Section 17 of KVAT Act - Section 17 of KVAT Act states that for partial rebate two conditions should be satisfied, one is that there should be sales of taxable goods and the second is that the dealer should also be making sales of exempted goods under Section 5 of the KVAT Act - As per the petitioner they are not dealing in sales of any exempted goods covered by Section 5 and therefore, Section 17 is wrongly made applicable - Whether the partial rebate scheme under Section 17 read with Rule 131 of Karnataka Value Added Tax Act, 2003 can be made applicable to the case of the petitioner or not? Held that - The provisions of Section 17 by title itself shows that it is in order to permit partial rebate for input tax credit. Sub-clause(1) of Section 17 provides that one of the requirement is if the dealer makes sale of taxable goods and exempted goods under Section 5. Since as per the petitioner they are not dealing in sales of exempted goods, it can be said that the petitioners are not covered by the provisions of sub-clause(1). However, the language of sub-clause(2) is different - When the petitioner is selling taxable goods and also despatches taxable goods outside the State otherwise than by way of sale and the Tribunal has found that Section 17(2)-partial rebate is available, no error can be said to have been committed by the Tribunal. It is not possible to accept the contention that Section 17(2) would not be applicable to a dealer who sells taxable goods and despatches goods outside the State otherwise than by way of sale - it cannot be said that the Tribunal has committed any error in not considering any substantial question of law more particularly for Section 17 and Rule 131 of the Rules. Petition dismissed - decided against petitioner.

Summary

Issues:
Whether the partial rebate scheme under Section 17 read with Rule 131 of Karnataka Value Added Tax Act, 2003 can be made applicable to the petitioner or not?

Analysis:
The petitioner-assessee raised questions of law, but the main issue was whether the partial rebate scheme under Section 17 of the KVAT Act could apply to them. The petitioner argued that both conditions of Section 17 should be satisfied, involving sales of taxable and exempted goods, which they claimed they did not deal with. The petitioner contended that the Tribunal wrongly applied Section 17 to them. On the other hand, the respondent supported the Tribunal's order, stating that the petitioner's contention lacked merit.

The court examined Section 17 of the KVAT Act, which allows for partial rebate for input tax credit. It observed that while the petitioner did not deal with exempted goods under sub-clause(1) of Section 17, sub-clause(2) had different requirements. The court clarified that if the dealer dispatched taxable goods outside the State under certain conditions, they would be covered by Section 17(2). The court emphasized that the word "or" in the provision should not be read as "and," indicating that either of the two conditions in sub-clause(2) could be satisfied for its applicability.

The court rejected the petitioner's argument that both conditions of selling taxable and exempted goods were necessary for Section 17(2) to apply. It emphasized that if a dealer sold taxable goods and dispatched goods outside the State, even without dealing in exempted goods, they could still fall under Section 17(2). The court also dismissed the petitioner's attempt to use Rule 131 to nullify the express provisions of Section 17, stating that the Rules should not override the Act's provisions.

In conclusion, the court held that Section 17(2) could apply to a dealer selling taxable goods and dispatching goods outside the State, even if they did not sell exempted goods. It found no error in the Tribunal's decision and dismissed the petitions as meritless. The court noted that questions regarding the calculation of facts and figures under Rule 131 were outside the scope of the present petitions, limited to questions of law.