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2018 (2) TMI 524 - HC - VAT and Sales TaxInput Tax Credit (ITC) - Section 10(3) of the KVAT Act, 2003 - denial on the ground that the claim of Input Tax Credit against the Output Tax Liability of the assessees did not pertain to the same ‘Tax period’ for which Output Tax Liability and Net Tax Liability was to be determined in accordance with Section 10(3) of the Act - interpretation of statute. Whether the claim of deduction or set off of Input Tax Credit against Output Tax Liability of the dealer can be restricted or denied on the ground of any time frame within which such Sales Invoices on the basis of which ITC is claimed should pertain or information or record of such ITC Invoices should be informed in the Returns to be filed, particularly if such time frame is restricted to the period of ‘Tax Period’ which can be as short as a month or a quarter, or the period of filing of Returns being 20 days from the end of month concerned or maximum six months from the end of ‘Tax period’ even for filing of Revised Returns disclosing errors and omissions? What is the true meaning and purport of Section 10(3) of the KVAT Act, 2003 vis-à-vis Section 35 of the same Act, 2003? Held that: - The substantive provision of Section 10(3) of the KVAT Act, 2003, did not lay down any such restrictive time frame for allowing the deduction of ITC against the OPT in a particular tax period to determine the net tax payable for that tax period and therefore there is no justification whatsoever to accept such an interpretation put forth by the learned counsels for the Respondent State. Such contentions had not only been negatived and with great respects - this Court can safely conclude that the machinery provisions cannot be allowed to override and defeat the substantive claim of the Input Tax Credits under Section 10(3) of the KVAT Act, 2003, which without any restriction of the time frame, allowed such deduction or credit of the ITC against the OPT liability of the Dealer in question. When the Assessing Authority could pass the impugned re-assessment order, Annexure C dated 29/04/2016 for the whole year in one go, disallowing the ITC claim illegally by restricting it on the basis of monthly Tax Periods, what can be the justification for disallowing the same, without it being found to be an unverified claim, not supported by valid Sales Invoices ? None - is the simple answer ! 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. The impugned assessment orders/re- assessment orders passed by the Respondent - Assessing Authorities to this extent of denying the claim of ITC to the petitioners assessees are illegal and unsustainable and deserve to be quashed and set aside by this Court. The matters would stand restored to the file of the Respondent Assessing Authorities to pass fresh orders in accordance with law - petition allowed.
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