2019 (7) TMI 717 - HC - VAT and Sales Tax

Exemption in respect of turnover - turn over involved in the import of equipments from the foreign country - Section 5(2) of the CST Act - reversal of estimation of turn over made on the basis of Rule 9(2A) (a) of the KVAT Rules - input tax credit - HELD THAT - The assessing authority had not perused the terms of the contract or the purchase order or the documents with respect to the import. Further, we take note of the contradictions on the factual findings with respect to reimbursement of the customs duty. In such circumstances, we are of the considered opinion that the materials available on record need to be re-evaluated in order to arrive at a conclusion as to whether the import was made pursuant to a contract between the awarder and the foreign company and as to whether the import was in pursuance of a purchase order issued by the awarder etc. It is also need to ascertain whether the goods were transmitted in the name of the awarder and whether it was cleared on behalf of the awarder, M/s KRL - the Appellant Tribunal can be directed to reconsider the above aspects and to arrive at a clear finding on the said aspect. Sustainability of the return based on estimation of turnover relying on Rule 9 (2A)(a) - HELD THAT - In Rule 9(1) the total turnover of a dealer engaged in works contract is stipulated as the contract amount received or receivable. Under subrule (2) of Rule 9, in clause (b) it is provided that, in relation to a works contract in which the transfer of property in goods had taken place not in the form of goods, but in some other form, the value of such goods at the time of incorporation into the work shall be considered as total turnover. Under sub-rule (2A)(a) of Section 9, it is provided that, for the purpose of computing the turnover as provided under sub-rule (2)(b), the value of the goods transferred in execution of the works contract shall not be less than the purchase value and shall include the incidental char instantly purchase mentioned therein. Based on the above provisions, it is contented by the learned Government Pleader that the assessing authority had estimated the turn over by taking note of the provisions contained in Rule 9 (2A) (a). It is contended that, the finding of the Tribunal in this regard is illegal and incorrect. It is pointed out that the Rule quoted by the Tribunal is Rule 9(3) (in the un-amended form) and not Rule 9(2A) (a) - Since we have decided to remit the matter to the Tribunal to look into the question of exemption with respect to the goods imported, we think it only appropriate to direct the Tribunal to consider and decide this issue also afresh, on the basis of the relevant Rule applicable. Denial of the claim for input tax credit - HELD THAT - The question remains as to whether the credit of input tax against the output tax can be denied based on the fact that the Form of invoice on the strength of which purchase was made by the assessee company was drawn in Form No.8B. Since the other questions are remanded for fresh decision, we are of the opinion that the above issue also can be left open for consideration and for a fresh decision by Appellate Tribunal. The tribunal shall restore the appeal on its file and dispose of the same afresh, after affording opportunity of hearing to both sides - petition allowed by way of remand.

Summary

Issues Involved:
1. Exemption of turnover related to imported equipment under Section 5(2) of the CST Act.
2. Estimation of turnover based on Rule 9(2A)(a) of the KVAT Rules.
3. Denial of input tax credit based on the form of invoices.

Detailed Analysis:

Exemption of Turnover Related to Imported Equipment:
The State challenged the Kerala Value Added Tax Appellate Tribunal's decision to exempt the turnover related to the import of equipment from the foreign company, arguing that the transaction should not fall under Section 5(2) of the CST Act. The assessing authority initially denied the exemption, noting that the awarder (M/s KRL) did not reimburse the customs duty paid by the assessee company, thereby concluding that the assessee had procured and transferred the goods to M/s KRL. The Tribunal, however, found that M/s KRL reimbursed the customs duty and that there was privity of contract between M/s KRL and the foreign company, indicating that the import was pursuant to a purchase order by M/s KRL. The High Court noted contradictions in the findings and remanded the matter to the Tribunal for re-evaluation of whether the import was made under a contract between the awarder and the foreign company, and if the goods were transmitted and cleared on behalf of M/s KRL.

Estimation of Turnover Based on Rule 9(2A)(a):
The Tribunal's decision to reject the estimation of turnover based on Rule 9(2A)(a) of the KVAT Rules was contested. The assessing authority had estimated the turnover considering the purchase value and incidental charges as stipulated under Rule 9(2A)(a). The Tribunal erroneously referred to Rule 9(3) instead of Rule 9(2A)(a). The High Court directed the Tribunal to reconsider this issue afresh, based on the relevant rule applicable, while remanding the case.

Denial of Input Tax Credit:
The Tribunal allowed the input tax credit claimed by the assessee company, which was initially denied by the assessing authority on the grounds that the purchase invoices were drawn in Form No.8B, intended for end consumers and not for registered dealers. The High Court left this issue open for fresh consideration by the Tribunal, noting that the credit of input tax against the output tax should be evaluated based on the form of the invoice used.

Conclusion:
The High Court allowed the revision petition, setting aside the Tribunal's order in T.A (VAT) No.804/11 on the three specific issues mentioned above. The Tribunal was directed to restore the appeal and dispose of it afresh, after hearing both sides, on the issues of exemption of turnover related to imported equipment, estimation of turnover based on Rule 9(2A)(a), and denial of input tax credit. The findings on other issues by the Tribunal were confirmed and not subject to re-opening. The Tribunal was urged to expedite the disposal of the appeal.