2016 (4) TMI 921 - HC - VAT and Sales Tax

Entitlement for input tax rebate - Section 10(3) of the KVAT Act - Purchases effected from local registered dealers - Held that - Since the petitioner was entitled for adjustment of excess tax paid in view of the said notice issued, the petitioner made adjustments of the excess taxes paid for the aforesaid tax periods against the output tax payable from the month of August 2014 in the monthly returns submitted in Form VAT 100 under the KVAT Act before the third respondent. Subsequently, the second respondent had observed that the allowance of input tax in the re-assessment orders as per the actual input tax claimed by the petitioner as per the returns filed in Form VAT 100 has resulted in loss of revenue and the re- assessment orders was opined to be erroneous insofar as the same as prejudicial to the interest of the public revenue in the light of the judgment of this Court in the case of State of Karnataka vs. M/s. Centum Industries (P) Limited 2015 (10) TMI 47 - KARNATAKA HIGH COURT . The second respondent had issued notice under the provisions of Section 41(1) proposing to rectify the reassessment order rejecting the input tax credit allowed earlier to the petitioner. Re-opening of proceedings - Re-assessment order was prejudicial to the interest of revenue - Held that - there is no authority or jurisdiction in the second respondent in seeking to reopen the proceedings on the basis of the said judgment. If at all, it is the revisional authority who may be vested with such power. It is to be noticed that it is indeed so, as the authority had the benefit of the judgment of this Court in Centum Industries and could not therefore on the basis of the said judgment, seek to re-open the proceedings on the footing that the re-assessment order was prejudicial to the interest of the revenue. If at all, it was for the revisional authority to have re-opened the said proceedings on any such opinion. - Decided in favour of petitioner

Summary

Issues:
1. Claim for input tax rebate under the Karnataka Value Added Tax Act, 2003.
2. Interpretation of provisions related to input tax restrictions under the KVAT Act.
3. Re-assessment proceedings initiated based on an inspection report.
4. Validity of re-assessment orders and notice of excess payment of tax.
5. Jurisdiction to rectify re-assessment orders based on a specific judgment.

Claim for input tax rebate under the Karnataka Value Added Tax Act, 2003:
The petitioner, a company engaged in leasing motor vehicles, claimed input tax rebate for tax periods 2008-09 to 2011-12 under the KVAT Act. The petitioner believed the excess input tax credit over output tax payable could be adjusted or carried forward. However, due to a misunderstanding of the law, the petitioner restricted input tax claims to the output tax payable, resulting in potential refunds. The goods involved fell under Schedule V of the KVAT Act, limiting input tax claims until resale or use in manufacturing.

Interpretation of provisions related to input tax restrictions under the KVAT Act:
The petitioner faced a situation where excess input tax was not reflected as refundable or carried forward due to the restrictions on goods specified in Schedule V. The petitioner's accounts were audited as required by Rule 34 of the KVAT Rules. Re-assessment proceedings were initiated based on an inspection report, leading to the issuance of re-assessment orders allowing input tax credit claimed by the petitioner.

Re-assessment proceedings initiated based on an inspection report:
The Assistant Commissioner of Commercial Taxes inspected the petitioner's premises, leading to observations by the Enforcement Authority and subsequent re-assessment proceedings by the second respondent. The re-assessment orders allowed input tax credit claimed by the petitioner, resulting in an excess tax payment notice issued to the petitioner.

Validity of re-assessment orders and notice of excess payment of tax:
The second respondent later deemed the re-assessment orders erroneous, citing a judgment and issued a notice proposing to rectify the orders, questioning the input tax credit allowed to the petitioner. The petitioner contended that the re-assessment was based on a specific judgment and argued that the second respondent lacked jurisdiction to reopen the proceedings based on that judgment.

Jurisdiction to rectify re-assessment orders based on a specific judgment:
The court found that the second respondent did not have the authority to reopen the proceedings based on the specific judgment cited. The court held that only the revisional authority could exercise such power. Consequently, the petitions were allowed, the impugned order was quashed, and the respondent was not precluded from initiating fresh proceedings in accordance with the law.