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2021 (3) TMI 952 - HC - VAT and Sales TaxRe-assessment order - claim for additional input tax credit at the rate of 4% as specified in Section 14 of the Act instead of 3% as specified in the notification dated 30.03.2007 - rejection of claim on the ground that the petitioner had not made such claim either in the original returns or revised returns - period from 01.04.2007 to 31.03.2008 - HELD THAT - The Act has been enacted with an object to replace the then existing sales tax system in line with national consensus for bringing in reforms in commodity taxation. One of the objects of the Act is to provide for set off of all tax paid at the earlier points in respect of goods sold against tax payable defined as output tax, at any point, the set off scheme being called as input rebating. In the instant case, the assessee had claimed the benefit of input tax credit at the rate of 4%. However, subsequently, a claim was made for additional input tax credit at the rate of 1% on account of an error in disallowing input tax credit at the rate of 4% as specified in Section 14 of the Act instead of 3% as specified in Notification dated 30.03.2007. No time limit has been prescribed under the provisions of the Act for making a claim for additional input tax credit. Therefore, the claim for eligible input tax credit is an indefeasible right which is available to the dealer under the Act without any limitation of time for claiming such credit - In the instant case, the government has prescribed the lower rate of 3% by Notification dated 30.03.2007 and therefore the aforesaid rate was applicable for the tax period from 01.04.2007 to 31.03.2008. Therefore, the petitioner cannot be deprived of the aforesaid statutory benefit and Section 35 of the Act does not curtail the entitlement of the dealer to such statutory benefit to it if such return is not filed within the time prescribed therein. From the communication dated 19.02.2020, it is evident that the tax has not been collected by the petitioner from Toyota Kirloskar Motors Ltd. It is also not in dispute that the petitioner by mistake paid the tax at a higher rate and when Toyota Kirloskar Motors Ltd. has confirmed that such a tax has not been collected by the petitioner, Section 43(1) of the Act has no application to the fact situation of the case and the order of forfeiture is illegal. The substantial questions of law are answered in favour of the petitioner and against the respondent - Petition allowed.
Issues Involved:
1. Validity of the orders passed by the Assessing Authority and the First Appellate Authority. 2. Determination of whether the petitioner collected tax from its purchaser, Toyota Kirloskar Motors Ltd., under Section 47(1) of the Karnataka Value Added Tax Act, 2003. 3. Application of Section 47(3) of the Karnataka Value Added Tax Act, 2003, regarding the forfeiture of excess tax. 4. Entitlement of the petitioner to claim input tax credit under Section 14 of the Karnataka Value Added Tax Act, 2003, despite errors in returns. 5. Authority of the Act under Section 39(1) to reduce the tax liability declared by the petitioner and allow additional input tax credit. Issue-wise Detailed Analysis: 1. Validity of the Orders Passed by the Assessing Authority and the First Appellate Authority: The Tribunal upheld the orders of the Assessing Authority and the First Appellate Authority. The petitioner contended that these orders were erroneous as they did not consider the petitioner’s claim for additional input tax credit at the rate of 4% instead of 3%, as specified in the notification dated 30.03.2007. The Tribunal relied on previous decisions, namely 'M/s. INFINITE BUILDERS AND DEVELOPERS Vs. ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES' and 'STATE OF KARNATAKA Vs. M/s. CENTUM INDUSTRIES PRIVATE LIMITED', to reject the petitioner’s claim. However, the Court found that these decisions were not applicable to the petitioner’s case, as the facts were different. 2. Determination of Whether the Petitioner Collected Tax from Toyota Kirloskar Motors Ltd. Under Section 47(1): The petitioner argued that it did not collect tax from Toyota Kirloskar Motors Ltd., as evidenced by a communication dated 19.02.2010. The Tribunal's decision to apply Section 47(1) was challenged on this basis. The Court found that the petitioner had indeed not collected the tax, and thus, the provisions of Section 47(1) were not applicable. The order of forfeiture was deemed illegal. 3. Application of Section 47(3) Regarding Forfeiture of Excess Tax: The petitioner claimed a refund of ?49,13,539/- due to an error in charging VAT at 12.5% instead of 4%. The Tribunal applied Section 47(3) to forfeit the excess tax. The Court noted that since the tax was not collected from Toyota Kirloskar Motors Ltd., the forfeiture under Section 47(3) was not justified. The petitioner was entitled to the refund. 4. Entitlement to Claim Input Tax Credit Despite Errors in Returns: The petitioner argued that it was entitled to claim input tax credit at the rate of 4%, and subsequently, an additional 1% due to an error in the initial claim. The Court held that the Act did not prescribe any time limit for claiming eligible input tax credit, making it an indefeasible right of the dealer. Section 35 of the Act, which deals with filing returns and revised returns, does not limit this entitlement. The Tribunal's reliance on previous decisions was found to be misplaced, as the facts were different. 5. Authority Under Section 39(1) to Reduce Tax Liability and Allow Additional Input Tax Credit: The petitioner contended that the authorities under Section 39(1) of the Act should have allowed the additional input tax credit. The Court agreed, stating that the petitioner could not be deprived of the statutory benefit due to procedural errors. The Tribunal's decision to deny this benefit was quashed. Conclusion: The substantial questions of law were answered in favor of the petitioner. The impugned order of the Tribunal dated 30.07.2015 was quashed to the extent it was against the petitioner. The revision petition was allowed, granting the petitioner the relief sought.
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