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TMI Blog2023 (1) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... nable the petitioners to calculate the net tax liability by deducting the input tax paid on its purchases from its output tax liability, irrespective of the month in which the selling dealer raises invoices. It is settled that the input tax credit is an indefeasible right. The main issue is whether the assesses who have filed the returns belatedly are entitled for input credit or not. A plain reading of provision of Section 10(3) of the KVAT Act, 2003, shows that no time limit or restriction is prescribed for availing the input tax credit. In Dai Ichi Karkaria Ltd. [ 1999 (8) TMI 920 - SUPREME COURT ], the Apex court has held that credit is indefeasible. The Modvat credit is similar to the Input Tax Credit in this case. Therefore, no exception can be taken to the view taken by the Hon ble Single Judge that the Input Tax Credit cannot be denied on the anvil of the machinery provisions or the provisions relating to the time frame. The assessees shall be eligible to avail the input tax credit as and when the tax is paid by them, without any limitation of time - Petition allowed. - S.T.R.P No.234 OF 2016 - - - Dated:- 22-12-2022 - HON BLE MR. JUSTICE P.S. DINESH KUMAR AND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see are subjected to series of quality control tests which takes about three to six months. Consequently, the normal period for receipt of goods to be accounted as purchases in the assessee s Books of Accounts varies up to six months and sometimes even more. 5. Once the goods are received, assessee's Inventory Account gets debited and the inward remittance account or GRIR (Goods Received / Invoice Receipt) Account is credited instead of Vendor's account. After the goods pass through the quality control tests, the GRIR Account gets debited in the books of assessee's account and Vendor's account is credited. Thereafter, payment is made to the Vendor as the goods are recorded as 'purchases'. If the goods fail in the quality control tests, the GRIR Account is debited and the accounting entry for inward remittance gets reversed. 6. Revenue issued a notice under Section 39(1) of the KVAT Act dated October 25, 2014 inter alia proposing to dis-allow the claim of input tax credit amounting to Rs.23,72,32,436/- in respect of the goods purchased during the tax period April 2010 to March 2011, on the ground that the input tax related to purchases made during the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmediately by registered post with acknowledgement due. 9. Feeling aggrieved, assessee, BEML has presented this appeal by framing questions of law recorded above. 10. Shri. G. Shivadass, learned Senior Advocate, for the Assessee inter alia contended that: assessee availed input tax credit on purchases in the month in which the purchases are accounted in their books of accounts, the time period may vary from the date of purchase invoice, owing to various factors, such as delay in receipt of inputs, testing, audit checks etc.; the provisions under the KVAT Act do not prescribe any time limit for taking input tax credit. Therefore, in the absence of any restriction provided in the KVAT Act, the eligibility to take credit in respect of tax paid by a dealer is independent of any time frame; prior to April 1, 2015, Section 10(3) of the KVAT Act, defined 'net tax payable by dealer as the difference between the amount of output tax payable in that period and the input tax credit as may be prescribed in that period. The term prescribed must be understood as a reference to restrictions in the Act and allied Rules which determine the eligibility of input tax cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural law and amendments that are clarificatory in nature. The current amendment being a substantive law and not explanatory in nature ought to have a prospective operation. The mere use of the term substitution will not make the law retrospective in operation; Section 35 of the KVAT Act provides for filing of the returns within the stipulated time, on which the computation of tax liability has to be made including Input Tax Credit in terms of Section 10(3). Section 35(4) provides for filing of revised returns within six months from the end of the relevant tax period. The timeline prescribed for filing of return or revised return should be always adhered to by the dealers without which timely tax compliance cannot be ensured by the State. Thus, timely and correct filing of returns is the duty cast upon the dealers by the statutes; any violation in filing of returns or incorrect declaration of tax liability and input tax credit claimed would attract penal provisions including disallowance of Input Tax Credit subject to provisions under section 10(3); 13. He has placed reliance on the following authorities: UOI Ors v. Kirloskar Pneumatic Co. Ltd. (1996) 4 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 20. The Hon ble Single Judge in Kisloskar Electric Co. Ltd. v. State of Karnataka held as follows: 31. One wonders whether the subsequent amendments effected by the Respondent State in the year 2015 and 2016 though not applicable to the assessment period involved in this batch of writ petitions presently being decided by this Court, is a 'relaxation' or a 'restriction' and whether it is for the benefit of the assessees as contended by the Respondent State or seeks to restrict and defeat the claim of ITC in the period of assessment following such amendment. Be that as it may. Since that amendment is neither applicable to the facts of the present case nor any of the sides has called the same in question, this Court need not make any further analysis of these amendments. 21. The State Legislature has clarified in Budget 2016-2017 Dated March 18, 2016, pg. 134., that Section 10(3) of the KVAT Act shall have effect only from 01.04.2015. 22. The amended After 2015 amendment w.e.f 01.04.2015., provision of Section 10(3) of the KVAT Act clearly provides that the input tax availed by a dealer in a tax period shall be relatable to goods purchased duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed the writ petition holding that: 30. Both the questions framed above are therefore liable to be answered in favour of the petitioners assessees. The claim of ITC cannot be restricted and denied on the stated grounds by Revenue. It cannot be denied only because ITC 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 substantive claims under Section 10(3) of the Act. The Revenue is entitled only to verify that the Sale Invoices are genuine and valid and such ITC claim is not duplicate, fictitious or bogus. Article 265 of the Constitution of India does not entitle the State to retain such tax paid by Selling Dealers and deny the claim of ITC credit or set off in the hands of the Purchasing Dealers who claim such ITC against their Output Tax Liability when they sell goods further, incurring such Output Tax liability. 27. Feeling aggrieved by the decisions, the Revenue has filed Writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co- relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that is becomes available. (Emphasis Supplied) 30. It is further held that: 29. Thus the claim of credit of input tax is indefeasible as was the case of CENVAT under Excise law and such credit of ITC under VAT law which is equivalent to tax paid in the chain of sales of the same goods, cannot be denied on the anvil of machinery provisions or even provisions relating to time frame which is law of limitation only bars the remedy rather than negativing the substantive claims under the taxing statutes. 31. Thus, in view of the above recorded findings, we respectfully agree with the opinion of the Hon ble Single Judge. 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