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2016 (1) TMI 468 - KARNATAKA HIGH COURT

2016 (1) TMI 468 - KARNATAKA HIGH COURT - TMI - Benefit of refund of tax paid on purchase of inputs as Special Economic Zone Developer - Karnataka Value Added Tax Act, 2003 (KVAT) - Held that:- Respondent-assessee is a developer of Special Economic Zone at Rachenahalli as per the permission granted by the Government of India. As per the policy of the Government of India, the assessee is eligible for refund of tax paid on purchases from the local dealers for the purpose of development, operation .....

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of Section 20(2), which is a beneficial legislation, makes it very clear that the developer of Special Economic Zone or an Unit located in any Special Economic Zone is entitled for the refund of input tax credit or deduction from the output tax payable by such dealer. Section 20(2) does not contemplate any period within which, such developer shall claim refund of input tax. Further, Rule 130A which was inserted w.e.f. 1-4-2007 also does not contemplate the period within which the developer shall .....

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a case to interfere with the same. The substantial questions of law framed are held against the Revenue - Decided against Revenue. - STRP NOS. 329/2014 and 482-487 OF 2014 in STA NOS. 2570-2576/2012 - Dated:- 30-9-2015 - MR. VINEET SARAN AND MR. B MANOHAR, JJ. For The Petitioner : Sri. T.K. Vedamurthy, HCGP For The Respondent : Sri. K.P. Kumar, Senior Advocate a/w Sri. S.Siva Kumar, adv., ORDER The Revenue has preferred these revision petitions challenging the order dated 23-01-2014 made in STA .....

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(hereinafter referred to as 'the KVAT Act' for short) having TIN No.29070284329. Dealer is a developer of Special Economic Zone, at Rachenahalli, Nagavara Outer Ring Road, vide order dated 23-4-2007, issued by the Development Commissioner, Cochin, SEZ, Cochin, the authorities specified by the Central Government in this behalf. As per the policy of Government of India, as a SEZ Developer, the assessee is entitled for refund of input tax paid on purchases from the local registered dealers .....

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the dealer has claimed input tax credit in a particular tax period related to purchase of some other months. Accordingly, issued an endorsement dated 31-3-2011 proposing to disallow the input tax claimed by the dealer. In response to the said endorsement, the dealer has filed objections to the said proposition notice contending that no where in the KVAT Act, it is stated that the purchasing dealer has to claim input tax credit on the same period, in which the bills have been raised by the selli .....

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leading to the accounting of these purchases in their books of account in the month in which the bills of the Suppliers are recognized and accounted as purchased. The objections filed by the dealer has been examined with the provisions of KVAT Act by the Assistant Commissioner of Commercial Taxes, by its proceedings dated 26-05-2011, relying upon Section 35(4) of the KVAT Act and has disallowed refund of input tax to the extent of ₹ 5,18,64,074/- while allowing refund of input tax to an e .....

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he First Appellate Authority, the dealer has filed appeals before the Tribunal. 3. The Tribunal, after examining the provisions of Section 20(2) read with Rule 128(2), 130A(4) of the KVAT Act and Rules, held that the dealer is entitled for the benefit of refund of tax paid on purchase of inputs as a SEZ Developer, by its order dated 23-01-2014. Being aggrieved by the said order, the Revenue has preferred these revision petitions. 4. Sri. T.K. Vedamurthy, Additional Government Pleader appearing f .....

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under the Act discovers any omission or incorrect statement therein other than as a result of an inspection or receipt of any other information, within six months from the end of relevant tax period. In the instant case, belated claim has been made and there is an inordinate delay in claiming refund of input tax credit. The assessee can claim the input tax credit in respect of each tax period within 20 days or 15 days at the end of preceding month or any other tax period as may be prescribed. Th .....

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petitions. 5. On the other hand, Sri. K.P. Kumar, learned Senior Advocate appearing along with Sri. S. Shivakumar for the respondent argued in support of the order passed by the Tribunal and contended that the State Government, with a view to encourage the development of Special Economic Zone Units and its developers, amended Section 20 of the KVAT Act on 01-04-2007 and special provision has been made under sub-section (2) of Section 20 of the KVAT Act. Under sub-section (2), the tax paid on pu .....

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per of any Special Economic Zone, is eligible for refund of tax paid on any inputs purchased by him or deduction of such tax from the output tax payable by him as specified in sub-section (2) of Section 20 of the KVAT Act. These are the beneficial legislations, in order to encourage the people to develop Special Economic Zones. Section 20 is itself a Code, and it is not controlled by any other Section. Section 10 will not be applicable to Section 20(2) of the KVAT Act. The Tribunal, after examin .....

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right in giving a finding that there is no time limit prescribed under the Act for claiming input tax and thus, the Assessee/Respondent is entitled to the claim of the input tax claimed beyond 6 months? (2) In the facts and circumstances of the case, Whether the Tribunal is right in holding that Section 20 of the KVAT Act overrides Section 35(4) of the KVAT Act? (3) Whether in the facts and circumstances of the case input tax claim by a SEZ unit being a dealer can avail the benefit of input tax .....

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nt, operation or maintenance of the processing area in a Special Economic Zone. In order to give the said benefit to those SEZ developers, sub-section (2) of Section 20 of the KVAT Act has been inserted to the Act, by Act No.6/2007 and Rule 130A has been inserted vide notification dated 26-07-2007, which was given effect to from 01-04-2007. 9. Section 20 and Rule 130A of the KVAT Act reads as under: 20. Deduction of input tax on exports and inter State sales, [and to special economic zone units .....

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who is a developer of any special economic zone or an unit located in any special economic zone established under authorization by the authorities specified by the Central Government in this behalf, shall be refunded or deducted from the output tax payable by such dealer, subject to such conditions and in the manner as may be prescribed.] Rule 130-A. Registered dealer being a developer of any Special Economic Zone:- (1) Any registered dealer being a developer of any special economic zone or an .....

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an unit in the processing area of a special economic zone; (c) If such inputs are purchased for use in manufacture, trading, production, processing, assembling, repairing, reconditioning, re-engineering or packing in an unit located in the processing area of any special economic zone. (2) The refund or deduction of tax under this rule shall be allowed on the goods actually used in the processing area of a special economic zone for the authorized operations as specified. 10. For the assessment y .....

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orrect statement therein, the dealer can file revised return within a period of 6 months. Since the assessee did not file the revised return within a period of six months, belated returns cannot be accepted and rejected the claim for refund of input tax credit. However, granted the relief only to the extent of ₹ 84,95,621/-. Being aggrieved by the same, the assessee preferred an appeal before the First Appellate Authority. The First Appellate Authority partly allowed the appeals and gave c .....

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reading of Section 20(2) read with Rule 130A of the KVAT Act and Rules makes it very clear that a developer of Special Economic Zone, while developing the SEZ Zone with the permission of the Competent Authority under the Government of India, is eligible for refund of tax paid on any inputs purchased by him or deduction of such tax from the output tax payable by him. Section 20(2) makes it very clear that the tax paid on purchase of inputs by the registered dealer who is developer of any Special .....

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g the input tax credit. He has contended that after receipt of the bills, measurement, certification about the quantity and quality of the work by the qualified engineer and fulfilling other formalities takes one or two months. On fulfilling the said formalities, these bills were processed in the Accounts Section and then finally accepted and accounted in the Books of Account. Under section 10(4) of the Act, the input tax credit can be claimed only when the input invoice is with the registered d .....

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falls. Section 35(1) makes it clear that every registered dealer shall furnish the return in such form and manner, and shall pay the tax due on such return within 20 days or 15 days after the end of preceding month. Nowhere in the said Section has it been contemplated that the Purchasing dealer shall claim input tax in the same month. Section 35(4) contemplates that any dealer having furnished the return discovers any omission or incorrect statement therein, he may furnish the revised return at .....

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titled for the refund of input tax credit or deduction from the output tax payable by such dealer. Section 20(2) does not contemplate any period within which, such developer shall claim refund of input tax. Further, Rule 130A which was inserted w.e.f. 1-4-2007 also does not contemplate the period within which the developer shall claim the refund of input tax. Section 35 cannot control Section 20(2). The benefit of beneficial legislation has to be extended to the SEZ dealers. The technicalities s .....

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