2021 (3) TMI 635 - HC - VAT / Sales Tax

Input Tax Credit - Audit Report submitted in Form VAT 240 even though such claims were not made while submitting monthly returns - appellant s grievance is that the Commissioner of Commercial Taxes has wrongly denied the input tax credit based upon the information available in Form No.240 by placing reliance upon the judgment delivered by this Court in the case of Centum Industries Ltd. 2015 (10) TMI 47 - KARNATAKA HIGH COURT - HELD THAT - By no stretch of imagination it can be said that merely because the dealer has submitted audited statement of accounts in Form VAT 240 he is entitled for input tax credit. It is pertinent to note that Form VAT 240 is only the audited statement of accounts issued by the Chartered Accountant/Cost Accountant/Tax Practitioner and it can never be construed as returns to compute the net tax liability under Section 10(3) as rightly held by the learned singe Judge. The substantive provision of the KVAT Act i.e., Section 10(3) has to be read harmoniously with the procedural provision of filing of the returns under Section 35 of the KVAT Act. The learned Single Judge was therefore justified in holding that filing of returns within the time prescribed under Section 35 of the KVAT Act is mandatory and based upon the returns filed by a dealer the tax liability is determined after deducting the input tax from output tax. Form VAT 240 can never be treated to be returns in any manner. The learned Single Judge was justified in dismissing the writ petitions as the appellant was claiming input tax credit based upon Form VAT 240 and by no stretch of imagination Form VAT 240 can be treated as a returns for the purposes of claiming input tax credit, especially in the light of the fact that filing of returns to compute the net tax liability has to take place keeping in view Section 10(3) and 10(4) of the KVAT Act. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Whether the appellant company is entitled to claim input tax credit based on Form VAT 240 despite not claiming it in the monthly returns.
2. Whether the interpretation of Section 10(3) of the KVAT Act by the Commissioner of Commercial Taxes and the learned Single Judge is correct.
3. Whether the denial of input tax credit based on Form VAT 240 results in discrimination among dealers and violates the scheme of the KVAT Act.
4. Whether the reliance on previous judgments by the learned Single Judge was appropriate.

Issue-Wise Detailed Analysis:

1. Entitlement to Claim Input Tax Credit Based on Form VAT 240:
The appellant company, engaged in civil works and registered under the KVAT Act, claimed input tax credit based on audited accounts in Form VAT 240. The company argued that it had complied with the statutory requirements by submitting the audited statement within the prescribed nine-month period. However, the Commissioner of Commercial Taxes initiated revisional proceedings and denied the input tax credit, stating that the input tax credit must be claimed in the monthly returns and not based solely on Form VAT 240. The court upheld this interpretation, emphasizing that Form VAT 240 is not a substitute for the mandatory returns required under Section 35 of the KVAT Act.

2. Interpretation of Section 10(3) of the KVAT Act:
The court examined the legislative intent and statutory provisions, including Section 10(3) and Section 35 of the KVAT Act. It was held that the input tax credit must be claimed within the prescribed period and reflected in the monthly returns. The court rejected the appellant's argument that the audited statement in Form VAT 240 could serve as the basis for input tax credit, reiterating that the statutory provisions mandate strict compliance with the filing of returns to determine tax liability.

3. Discrimination Among Dealers:
The appellant argued that denying input tax credit based on Form VAT 240 would create discrimination between dealers required to file the form and those who are not. The court dismissed this argument, stating that the statutory provisions apply uniformly to all dealers, and the requirement to file Form VAT 240 for dealers with a turnover exceeding ?100 lakhs does not entitle them to claim input tax credit outside the prescribed period. The court emphasized that Form VAT 240 is an audited statement, not a return, and cannot replace the mandatory returns required for claiming input tax credit.

4. Reliance on Previous Judgments:
The court reviewed the reliance on previous judgments, including the case of State of Karnataka vs. Centum Industries Pvt. Ltd., and Infinite Builders and Developers vs. Additional Commissioner of Commercial Taxes. The court found that these judgments supported the interpretation that input tax credit must be claimed in the returns filed within the prescribed period and not based solely on audited statements. The court also distinguished the cases cited by the appellant, noting that they were either not applicable to the KVAT Act or involved different factual circumstances.

Conclusion:
The court concluded that the appellant company is not entitled to claim input tax credit based on Form VAT 240 without reflecting it in the monthly returns. The interpretation of Section 10(3) by the Commissioner of Commercial Taxes and the learned Single Judge was upheld, and the denial of input tax credit based on Form VAT 240 was found to be consistent with the statutory provisions. The court dismissed the writ appeals, affirming that Form VAT 240 cannot replace the mandatory returns required for claiming input tax credit under the KVAT Act.