2013 (8) TMI 340 - HC - VAT and Sales Tax

Carry forward of excess tax - Petitioner paid amount in excess of tax liability - Authority denied carrying forward of tax - Held that - petitioner has effected much payment well in advance, resulting in excess input tax credit and the amount is lying at the hands of the Government/department, who was virtually generating funds, making use of the same - respondents have adjusted the excess payments against the subsequent liablity in respect of the subsequent assessment years, while the amount of the petitioner was lying at the hands of the Government, without having the same refunded - There appears no rationale on the part of the respondents in claiming interest and penalty with regard to the payment to be effected by the petitioner in respect of the subsequent assessment years - concerned respondent is directed to reconsider the matter, especially with regard to the objection to be placed by the petitioner and also on the other points, if raised, which are not covered in this writ petition but form the subject matter - Decided in favour of Assessee.

Issues:
Rights of an assessee to carry forward and set off excess input tax credit, issuance of notices negating the claim, interpretation of statutory provisions regarding adjustment of tax credit, dispute over adjustment of excess input tax credit for different return periods, consideration of refund applications, justification for interest and penalty imposition, discrepancy in respondent's stand on carrying forward excess tax credit, interpretation of Section 11(6) and Rule 47(5) of the KVAT Act.

The judgment delves into the rights of an assessee to carry forward and set off excess input tax credit under Section 11(6) of the KVAT Act. The petitioner sought to adjust excess input tax credit for March 2006 against the tax payable for April 2006, but the respondent issued notices negating this claim, insisting on refund and imposing interest and penalty. The petitioner contended that the statute allows for such adjustment to the next return period. The respondents, in their counter affidavit, argued against carrying forward the excess payment beyond the same assessment year. The petitioner highlighted the acceptance of refund applications and previous adjustments made by the authorities for subsequent assessment years, contradicting the respondent's stance. The petitioner emphasized the statutory provisions and sought adjustment based on Section 11(6) and Rule 47(5) of the KVAT Act.

The learned counsel for the petitioner argued that there was no statutory bar on adjusting excess input tax credit from one return period to the next, contrary to the respondent's contentions. The petitioner presented evidence of filed refund applications and previous adjustments made by the authorities for subsequent assessment years, indicating the acceptance of such adjustments. The petitioner emphasized the enabling provision under Section 11(6) and refuted the respondent's interpretation of the proviso to Section 11(6). The petitioner contended that the benefit of carrying forward excess tax credit should not be confined to a specific assessment year but should be allowed for the next return period as well.

The learned Government Pleader for the respondents acknowledged the presence of refund applications in the file and the previous adjustments made by the authorities for subsequent assessment years. However, the Government Pleader stated that such adjustments were not in line with the statutory requirements of Section 11(6). The court noted the excess input tax credit lying with the government, the acceptance of refund applications, and the lack of rationale for imposing interest and penalty on the petitioner for subsequent assessment years. The court directed the respondent to reconsider the matter, address the petitioner's objections, and finalize the proceedings within a specified timeline, allowing the petitioner to submit objections within two weeks.

In conclusion, the judgment addresses the dispute regarding the adjustment of excess input tax credit for different return periods, emphasizing the statutory provisions of the KVAT Act. It highlights the rights of an assessee to carry forward and set off excess input tax credit, the acceptance of refund applications, and the need for the respondent to reevaluate the matter in line with the statutory provisions. The court's decision aims to resolve the issues raised by the petitioner regarding the adjustment of tax credit and the imposition of interest and penalty, ensuring compliance with the law and providing a fair resolution to the dispute.

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