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TMI Blog2019 (12) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the re-assessment order dated 25.11.2016 passed by the prescribed authority under the provisions of the Act in addition to the other prayers sought. However, the prayers in clauses [d], [e], [f] and [g] are not pressed as having rendered infructuous. In W.P.No.32896/2016 the petitioner has challenged the reassessment orders as well as the demand notices dated 17.05.2016 and 18.05.2016 relating to the assessment years 2012-13 and 2013-14 respectively. Though the petitioner has sought for a direction to the respondent to allow the deduction of sub-contractor for the assessment year in question, the same is not pressed. Accordingly, the said prayer is dismissed as not pressed. 3. The fulcrum of dispute in these matters revolves around the interpretation of Sections 10[3] and 10[4] of the Karnataka Value Added Tax Act, 2003 ['Act' for short] inasmuch as the availment of input tax credit by the registered dealer based on the annual audit statement of accounts filed in Form VAT 240 notwithstanding no claim made in the return of turnover filed under Section 35 of the Act. 4. The petitioners are the dealers registered under the provisions of the Act. The claim of the input tax credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the petitioners argued that the amendment to Section 10[3] of the Act by Act No.5 of 2008 w.e.f., 01.08.2008 substituting the phrase "this Act" for the words "Chapter V" would indicate the entitlement of input tax credit by the registered dealer based on VAT Form 240. It was argued that the decision of the Authorities in rejecting the claim of input tax credit is contrary to Section 10[3] of the Act. Reliance was placed on the catena of judgments. 9. Learned Additional Government Advocate submitted that the writ petitions are not maintainable as the petitioners have not exhausted the alternative and efficacious remedy of statutory appeal available under the provisions of the Act. 10. Learned counsel inviting the attention of the Court to Section 35 of the Act, submitted that returns are required to be filed by every registered dealer and shall pay the tax due on such return within 20 days after the end of the preceding month or any other tax period as may be prescribed. Revised returns can be furnished under Section 35[4] of the Act wherein a time limit of 6 months is prescribed. In terms of Section 38[1], every dealer shall be deemed to have been assessed to tax based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranch returns where the registered dealer has more than one place of business. (4) If any dealer having furnished a return under this Act, other than a return furnished under sub-section (3) of Section 38, discovers any omission or incorrect statement therein, other than as a result of an inspection or receipt of any other information or evidence by the prescribed authority, [a] he shall furnish a revised return within the time prescribed for filing the return for the succeeding tax period; and [b] he shall furnish a revised return any time thereafter but within six months from the end of the relevant tax period, if so permitted by the prescribed authority." 13. Section 38 deals with the assessment of tax. In terms of the said provision, every dealer shall be deemed to have been assessed to tax based on the return filed by him under Section 35, except in cases where the Commissioner may notify the dealer of any requirement of production of accounts before the prescribed authority in support of a return filed for any period and such authority shall proceed to assess such dealer - [a] on the basis of the return filed where he is satisfied that the return filed is correct and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x restrictions specified in Sections 11, 12, 14, 17, 18 and 19, the net tax payable by a registered dealer in respect of each tax period shall be the amount of output tax payable by him in that period less the input tax deductible by him as may be prescribed in that period and shall be accounted for in accordance with the provisions of Chapter V. Section 10[3] of the Act after its amendment by Act No.5 of 2008 w.e.f., from 01.08.2008: [3] Subject to input tax restrictions specified in Sections 11, 12, 14, 17, 18 and 19, the net tax payable by a registered dealer in respect of each tax period shall be the amount of output tax payable by him in that period less the input tax deductible by him as may be prescribed in that period and shall be accounted for in accordance with the provisions of this Act. SECTION 10(3) OF THE KVAT ACT AFTER ITS SUBSTITUTION IN 2015 w.e.f. April 1, 2015: 10. Output tax, input tax and net tax (1) and [2] ..................... (3) Subject to input tax restrictions specified in Section 11, 12, 14, 17,18 and 19, the net tax payable by a registered Dealer in respect of each tax period shall be the amount of output tax payable by him in that period les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, cannot be denied on the anvil of machinery provisions. It is held that the input tax credit cannot be denied only because input tax credit claim is not made in respect of sale invoices which are not pertaining to same tax period, nor it can be denied on the ground that such claim is not made immediately in the month or months following the month of purchase of goods in question. The machinery provisions of filing of returns under Section 35 of the KVAT Act cannot defeat the substantial claim under Section 10[3] of the Act. The revenue is entitled only to verify that the sale invoices are genuine and valid and such input tax credit claim is not duplicate fictitious or bogus. Indeed, it was not in dispute the input tax credit was claimed in the returns filed by the registered dealer. 19. Pursuant to the said decision of Kirloskar Electricity Company, circular No.15/2017-18 dated 08.02.2018 has been issued by the Commissioner of Commercial Taxes whereby it is instructed as under: "1. Claim of Input Tax Credit [ITC] shall not be denied only because ITC claim is made in respect of sale invoices which are not pertaining to the same tax period of the purchase. 2. Input Tax Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners would be deprived of the benefit of availing credit of tax paid on their purchases, it would result in tax being levied under the provisions of the same Act on the same commodity at multiple stages. Xxxx A case can be found in favour of the petitioners in the alternative as well. In that, it is not in dispute that from the inception of the KVAT Act, Section 10(3) was consistently interpreted by the Revenue to mean that a dealer is permitted to deduct the input tax paid on his purchases irrespective of the month in which the purchases were effected. Based on the understanding that Section 10(3) did not require dealers to avail credit only in the month in which the purchases were effected. They were held entitled to avail such credit, as long as the claim of input tax credit was supported by the prescribed documents. The ambiguity as to the purport of Section 10(3) arose as a result of the Department's clouded interpretation of the Centum Industries case. The newly substituted provision clears the air and puts to rest the ambiguity, it may hence be said that the amendment to Section 10(3) is clarificatory and therefore could be given retrospective effect." 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od, as no period of limitation is prescribed. Once payment of input tax is admitted, the assessee is entitled to the benefit of setting off the input tax against the output tax. If the said interpretation were to be accepted it would render the period prescribed under the Act meaningless. When in the statute a specific period is prescribed for filing of the return under Section 35(1) of the Act and when a provision is made under Section 35(4) of the Act for filing of a revised return again prescribing a time limit, when in sub-section (3) of Section 10 it is categorically stated that the input tax shall be accounted in accordance with the provisions of this Act, the assessee would not be entitled to the benefit conferred on him under sub-section (4) of Section 10, if it is not accounted for. 14. In the instant case, the assessee paid input tax for the month of June 2006. In the returns filed in July 2006 he did not put forth any claim. He also did not file any revised return within 6 months putting forth the said claim. That is the period prescribed under law under Section 35 (1) and 35 (4) of the Act. It is only in the return filed in the month of February 2007, after the expiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the prescribed manner. Provided that every dealer whose total turnover for the year ending Thirty First day of March, 2010 exceeds forty lakh rupees shall have his accounts audited." 25. Rule 34 of the Rules provides for audit and submission of accounts. The said rule is extracted hereunder for ready reference: "34. Audit & submission of accounts. - (1) Every registered dealer who is, not a company defined under the Companies Act, 1956 (Central Act 1 of 1956) or a company incorporated outside India and required to have his accounts audited under sub-section (4) of section 31 shall have his accounts audited by a Tax Practitioner enrolled under rule 163 for a period of not less than three years or under section 36 of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957) for a period of not less than three years on the date of such audit or by a Chartered Accountant [or a Cost Accountant]. (2) Every other registered dealer who is required to have his accounts audited under sub-section (4) of section 31 shall have his accounts audited by a Chartered Accountant. (3) The audited statement of accounts shall be submitted in Form VAT 240 to the jurisdictional Local VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006. So it is urged by the appellant/assessee that even long after the expiry of the period in which the revised return could have been filed, the fact remains that there is no response by filing any revised returns. In such a position, we are of the view that the first appellate authority did go out of its duties and responsibilities and acted out of its jurisdiction to entertain a claim for deduction of input tax rebate in favour of the assessee by accepting some material, purporting it to be based on the books of accounts and the purchase invoices etc and in granting reliefs to the assessee. We find, it is a case of the first appellate authority acting more loyal than the king, even though a claim had not been put forth by the assessee through the returns, the first appellate authority has ventured to allow the appeals and grant relief to the assessee, contrary to statutory provisions! 54. The Act specifically provides for the manner in which the extent of purchases made by an assessee from registered dealer and the claim for corresponding tax made at the time of purchase can be claimed by prescribing a specific mode and that is not complied by the assessee. Therefore, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the petitioners discussed supra, the claim of input tax credit was made in the subsequent months/belatedly in the returns filed. In the present case, it is not in dispute that no such claim of input tax credit is made by the assessee in filing the monthly returns but the same is claimed on the basis of audited statement of accounts, Form VAT 240 - certificate issued by the Chartered Accountant/Cost Accountant/Tax Practitioner within a period of 9 months after the end of the relevant year. 29. Return is the basis on which the computation of tax liability has to be made including the input tax credit in terms of Section 10[3] and Section 10[4]. It is not in dispute that no input tax credit has been claimed by the petitioners in any of the return filed during the relevant tax periods, merely on the audited statements filed by the Chartered Accountant/Cost Accountant/Tax Practitioner, no input tax credit can be allowed. If such an argument if accepted, filing of monthly returns would be an empty formality making the provisions of Section 35 to 56 as well as Section 72 of the Act redundant. The arguments of the learned counsel that the amendment brought to Section 10[3] with e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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