2018 (2) TMI 773

td. And Others Versus The State of Karnataka [2018 (2) TMI 524 - KARNATAKA HIGH COURT], where it was held 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 - petition allowed. - Writ Petition Nos. 48393/2016 & 49461-471/2016 ( T-RES ) - 6-2-2018 - Vineet Kothari, J. Ms. Veena J. Kamath, for Mr. Govindraya Kamath K, Advocate for Petitioner Mr. T. K. Vedamurthy, AGA for Respondent ORDER 1. Both the learned counsels at the bar agree that the controversy involved in these writ petitions is squarely covered by a decision of this Court in Writ Petition No.58917-928/2016 and connected matters (Kirloskar Electric Company Limited Vs. State of Karnataka and another) decided on 10/01/2018 with regard to the claim of Input Tax Credit under Section 10(3) of the KVAT Act, 2003, wherein it is held as under:- 19. A closer look at the contextual facts of the case and as explained in bracketed portion in the aforesaid quote from the Division Bench .....

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of the KVAT Act, 2003 but on that aspect of the matter, this Court sitting singly cannot express a different view due to the judicial discipline. But the facts and context before Centum s case were entirely different and therefore that judgment is of little help to the Revenue - Department in these cases. 21. The learned Additional Advocate General also contended before the Court that the amendments were effected in Section 10(3) of the KVAT Act, 2003 in the year 2015 and 2016, though for the period of assessments in question before this Court in the present batch of writ petitions are admittedly and without any dispute from either side are much prior to these amendments in Section 10(3) and therefore the question of effect of these amendments upon the assessments in hand as challenged before this Court need not be even gone into. However, the learned Additional Advocate General pointed out that these amendments would only now after 01/04/2015 allow the Input Tax Credit to the dealers, if the input tax pertains to a tax period of five months prior to the tax period in which such ITC is claimed, as how an amendment beneficial to the interest of the assessees and realizing their prac .....

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l Apparel Private Limited case, but this Court is of the considered opinion that the Respondent Department is taking an unnecessarily distorted view of the observations made by the Division Bench of this Court in the case of Centum Industries Private Limited, where the Division Bench while disallowed the said claim of ITC made at a belatedly stage and observed simply as an obiter that the claim of ITC should relate to the tax period in question. The Division Bench never said that the ITC Invoice or Sale Invoice should also be pertaining to the same tax period, in which the credit of such ITC is claimed by the Dealer. 23. The learned counsels for the Respondent State were at complete loss of words to the question put by the Court as to, under what authority of law the State can retain the tax paid by the selling Dealer to the State as collected under the Sale Invoice which is passed on to the purchasing Dealer who are the assessees - petitioners before this Court, if ITC in respect of such sale invoice was to be disallowed, contrary to the very concept of VAT law and the unrestricted language of Section 10(3) of the KVAT Act, 2003 and in apparent violation of Article 265 of the Cons .....

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ed by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilized, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer 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. 29. Thus the claim of credit of .....

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d unsustainable and deserve to be quashed and set aside by this Court. 33. The writ petitions are accordingly allowed and the impugned orders are quashed and set aside. The matters would stand restored to the file of the Respondent Assessing Authorities to pass fresh orders in accordance with law as interpreted above as far as claim of Input Tax Credit is concerned. 34. This Court is of the further opinion that despite more than one judgment interpreting the provisions of Section 10(3) of the KVAT Act, 2003, in favour of the assessees, the tendency on the part of the Assessing Authorities of the Respondent Department to still keep on passing the orders contrary to these judgments is in utter disregard of the judicial and hierarchical discipline which they are bound to observe and it may also amount to a deliberate disobedience on their part and may invite contempt action and therefore to prevent any such further unnecessary litigation on this issue, at the behest of the different Authorities of the Department taking a contrary view, it is directed that the Head of the Respondent Department, namely, the Commissioner of Commercial Taxes shall issue a Circular in terms of the various .....

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