2020 (5) TMI 342 - HC - VAT and Sales Tax

Refund of Input Tax Credit - Invocation of suo-moto revision power under Section 64 of KVAT Act - denial of refund on the ground of non-payment of tax collected from the appellant by the sub-contractors - burden of proof - HELD THAT - The co-ordinate Bench of this Court in the case of M/S BHAVANI ENTERPRISES, SMT. CHANDRA KANTA AGARWAL, SRI RITESH AGARWAL, SMT. SHRUTI AGARWAL VERSUS THE ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES ZONE III 2018 (6) TMI 974 - KARNATAKA HIGH COURT while examining the issue of burden of proof has observed that the provision of Section 70 of the Act in its plain terms clearly stipulates that the burden of proving that input tax claim is correct lies upon the dealer claiming such input tax credit. The factual finding given by the prescribed Authority as well as the Appellate Authority requires to be examined by the Revisional Authority. The Revisional Authority proceeded to set-aside the order of the first Appellate Authority on the ground that the issue is not relating to the question whether the assessee is not a developer of SEZ but the issue relates to the claim of input tax credit made by the assessee on the basis of the invoices issued by the sub-contractors who have not at all deposited the tax to the extent of input tax credit claimed by the assessee - the input tax paid on the purchases from M/s. Dev Structural India Private Limited, Belagavi and M/s. Kanmani Constructions Pvt. Limited, Bengaluru, is refunded after due verification of all the documentary evidence. Whether allowing of the input tax credit as aforesaid would preclude the prescribed Authority in denying the input tax credit claimed by the assessee requires to be examined by the Addl. Commissioner of Commercial Taxes. It is not the case of the respondents that the sub-contractors are not in existence or invoices issued by such contractors are fake or any fraud has been played by the appellant. In such circumstances, denial of input tax credit relating to the refund of input tax paid, eligible for the appellant under Section 20(2) of the Act requires to be further examined by the Revising Authority with reference to Section 10 of the Act. Appeal allowed in part and part matter on remand.

Summary

Issues:
Challenge to order denying input tax credit claimed by appellant for tax periods 2010-11 under Karnataka Value Added Tax Act, 2003.

Analysis:
1. The appellant, a private limited company engaged in SEZ development, maintenance, and operation, challenged the denial of input tax credit by the Additional Commissioner of Commercial Taxes for purchases made from sub-contractors in VAT-100 returns for 2010-11. The Appellate Authority initially allowed the appeal, but the Revisional Authority set aside this decision, prompting the present appeal.

2. The appellant argued that the Revisional Authority failed to justify invoking revision powers under Section 64 of the Act. They contended that non-payment of tax by sub-contractors should not deny input tax credit rightfully claimed under Sections 10 and 20 of the Act. The appellant cited legal precedents to support their position.

3. The Revenue, represented by the Additional Advocate General, maintained that the denial of input tax credit was appropriate as the sub-contractors had declared less output tax than claimed by the appellant. Despite opportunities, the appellant failed to prove the payment of output tax by the sub-contractors, justifying the denial of input tax credit.

4. Both parties cited relevant judgments to support their arguments, emphasizing the burden on the appellant to prove the validity of transactions and claim input tax credit correctly. The burden of proof lies on the dealer claiming such credit, as per Section 70 of the Act.

5. The Court examined previous judgments related to burden of proof and the genuineness of transactions to determine entitlement to input tax credit. The Revisional Authority's decision to set aside the Appellate Authority's order was based on the issue of sub-contractors not depositing tax corresponding to the claimed credit, necessitating further examination.

6. In light of the facts and legal aspects, the Court partially allowed the appeal, setting aside the Revisional Authority's order and remitting the matter for fresh consideration. The Revisional Authority was directed to reevaluate the case, considering the legal aspects discussed, and allowing the appellant to provide additional documents to support their claim.

7. The Court's order aimed to ensure a fair reconsideration of the denial of input tax credit, emphasizing the need for a thorough examination of the factual and legal aspects involved in the case.