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2015 (12) TMI 1867 - KERALA HIGH COURTInput tax credit - tax paid at the time of purchase of goods from their suppliers - whether amounts offered by way of discount through credit notes issued by the supplier of the goods, at a point in time subsequent to the sale of the goods to the petitioners, can be added to the sales turnover of the petitioners' by invoking the provisions of explanation VII to the definition of turnover under Section 2(iii) of the KVAT Act? - HELD THAT:- The essence of the scheme is that, whenever tax is paid by a dealer at the time of purchase of goods, he is entitled to take credit of the tax so paid and to set off the said tax amount against the output tax to be paid by him at the time when he sells the product. A variation of the input tax credit availed by him is called for only in a situation where, it is found that the tax paid by the supplier of the goods, of which credit was taken by the petitioner as input tax credit, is subsequently reduced on account of a refund granted to the supplier, of the tax initially paid by him. It follows that, in the absence of any claim for refund of tax paid by the supplier, the input tax claimed by the petitioners cannot be varied or modified, save in the situations mentioned in Section 11 of the KVAT Act, such as, for instance, where the goods in question are sold at a price lower than that at which they were purchased or when the goods are sold at a subsidised rate. On a perusal of the notices and assessment orders that are impugned in these writ petitions, it is found that the assessing authorities have not examined the issue as required. The assessment orders impugned in these writ petitions are therefore vitiated by a non-application of mind and is therefore quashed. The respondent assessing authorities in all these writ petitions, are directed, to complete the assessment proceedings, initiated against the petitioners through the notices issued to them under Section 25(1) of the Act, by taking note of the observations in this judgment, and after granting the petitioners an opportunity of being heard in the matter. Petition disposed off.
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