2019 (1) TMI 611 - HC - VAT and Sales Tax

Input Tax Credit - assessee received incentives from its manufacturer - disallowance of the discount despite filing of credit notes and declaration as per Circular No. 41/2007 - applicability of instructions contained in Circular 41/2007 to dealers like the petitioner - failure to account the turnover - Held that - Having gone through Form No. 9, we are of the opinion that it is not confined to a mere transaction of return of goods. Rule 59 and section 41 read together would only indicate that if a credit note is issued on return of goods, then it should be in Form No. 9. This is not to say that the form prescribed for credit note under the Act is exclusively for the purpose of return of goods. A reading of the form and the various details enumerated therein would also indicate that, the form would take in all instances where a credit note is issued, based on which a claim is raised by an assessee. The credit note having not been issued in the prescribed form, there is no question of an input tax credit being granted with respect to the incentive, as has been held by the AO. We are of the opinion that the Tribunal has rightly confirmed the order of the AO. The question of law with respect to Circular No. 41/2007 would not arise since the assessee had not made a claim with the prescribed form. Though the amounts were disclosed in the books of account, discrepancy was noticed in the audit statement and the petitioner did not attempt a revised return under section 42 of the Act - the questions of law raised are to be answered against the assessee and in favor of the Revenue.

Summary

Issues:
1. Input tax credit refusal by the Kerala Value Added Tax Appellate Tribunal.
2. Disallowance of discount despite filing credit notes and declaration.
3. Applicability of circular instructions to dealers.
4. Failure to account for turnover despite being in books of accounts.

Analysis:

Issue 1: Input Tax Credit Refusal
The petitioner, a dealer in electrical items, claimed input tax credit for tax paid on goods purchased from the manufacturer. An incentive of ?11,18,322 was not disclosed by the petitioner. The Assessing Officer (AO) found a reduction necessary due to non-disclosure of the incentive in returns filed. The petitioner did not revise returns despite discrepancies in the audited statement, leading to the denial of input tax credit.

Issue 2: Disallowance of Discount
The petitioner contended that the incentive received was for sales targets and distribution expenses. Credit notes were submitted but not in the prescribed Form No. 9. The AO did not acknowledge any declaration from the manufacturer. The Senior Government Pleader argued that Form No. 9 is mandatory for credit notes and no revision of returns was made based on the audit statement, disallowing the input tax credit.

Issue 3: Applicability of Circular Instructions
Circular No. 41/2007 allowed input tax credit for expenses reimbursed through credit notes without output tax deduction. The circular was initially for cement dealers but extended to all dealers based on a court ruling. The failure to adhere to the circular's conditions led to the denial of input tax credit.

Issue 4: Failure to Account for Turnover
The High Court examined Form No. 9 and ruled that it is not limited to return of goods transactions. As the credit note was not issued in the prescribed form, the input tax credit was rightly denied. The failure to follow the prescribed form and lack of necessary details in the credit notes supported the Tribunal's decision.

In conclusion, the Court dismissed the revision, upholding the denial of input tax credit due to non-compliance with prescribed forms and failure to revise returns despite discrepancies. The questions of law were decided against the assessee, emphasizing the importance of adhering to statutory requirements for claiming tax benefits.