Case Note & Summary
The State of Karnataka, through the Department of Finance, filed revision petitions under Section 65(1) of the Karnataka Sales Tax Act, 1957, challenging the order of the Karnataka Appellate Tribunal dated 25.7.2011 in STA Nos. 2649 and 2650/2010. The Tribunal had allowed the assessee's appeal and granted input tax credit. The assessee, M/s Centum Industries Private Limited, is a private limited company engaged in the manufacture and sale of electrical and electronic components. It is registered under the Karnataka Value Added Tax Act, 2003, and the Central Sales Tax Act, 1956. During an audit, it was noticed that the assessee had claimed input tax rebate in respect of local registered purchases. The assessee calculated VAT at 4% and 12.5% separately in invoices as local sales. In respect of Central Sales Tax, the assessee charged and collected at 4% against 'C' form/'D' form and 12.5% without statutory form. In the monthly returns for February 2007, the claim of input tax of Rs.2,43,306/- was rejected on the ground that the claim was not pertaining to the tax for the period. The revenue contended that the assessee had not produced tax invoices from registered dealers, and therefore, input tax credit was not admissible under Section 9(2)(b) of the KVAT Act. The Tribunal, however, allowed the credit on the principle that once tax has been paid, the party should not be asked to pay tax again. The High Court, in revision, held that the Tribunal's order was erroneous. The court observed that input tax credit is a statutory right and can be claimed only if the conditions under the Act are satisfied. Section 9(2)(b) of the KVAT Act provides that input tax credit is not available in respect of purchases from unregistered dealers. The assessee failed to produce tax invoices from registered dealers to substantiate its claim. The burden of proof lies on the assessee to show that the purchases were from registered dealers. Since the assessee did not discharge this burden, the claim for input tax credit was rightly rejected by the authorities. The High Court allowed the revision petitions, set aside the order of the Tribunal, and restored the order of the original authority denying input tax credit.
Headnote
A) VAT - Input Tax Credit - Unregistered Dealer - Section 9(2)(b) Karnataka Value Added Tax Act, 2003 - The assessee claimed input tax credit on purchases from unregistered dealers. The revenue denied the claim. The Tribunal allowed the credit on the principle that once tax has been paid, the party should not be asked to pay tax again. The High Court held that input tax credit is not available for purchases from unregistered dealers as per Section 9(2)(b) of the Act, and the Tribunal's order was erroneous. (Paras 1-3) B) VAT - Input Tax Credit - Tax Invoice - Section 9(2)(b) Karnataka Value Added Tax Act, 2003 - The assessee failed to produce tax invoices from registered dealers. The High Court held that without a valid tax invoice from a registered dealer, input tax credit cannot be claimed. The burden is on the assessee to prove that the purchases were from registered dealers. (Paras 2-3)
Issue of Consideration
Whether the assessee is entitled to input tax credit under the Karnataka Value Added Tax Act, 2003, in respect of purchases made from unregistered dealers, and whether the Karnataka Appellate Tribunal was correct in allowing such credit.
Final Decision
The High Court allowed the revision petitions, set aside the order of the Karnataka Appellate Tribunal, and restored the order of the original authority denying input tax credit.
Law Points
- Input tax credit
- Unregistered dealer
- Section 9(2)(b) Karnataka Value Added Tax Act
- 2003
- Section 65(1) KST Act
- Burden of proof
- Tax invoice
