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2018 DIGILAW 411 (KER)

State of Kerala v. Collins

2018-06-04

K.VINOD CHANDRAN, R.NARAYANA PISHARADI

body2018
ORDER : K. Vinod Chandran, J. Though there are several questions of law raised in the Memorandum of Revision, we re-frame the question as follows: “(i) Whether the Tribunal was correct in having permitted special rebate under Section 12 of the Kerala Value Added Tax Act, 2003 (for brevity, the Act of 2003) to compute the net tax payable by the assessee even with respect to the additions made on the purchase suppressions deeming such purchases having been made from unregistered dealers? (ii) Whether the decision in Sulthan Gold International v. State of Kerala 2012 KHC 257 requires reconsideration?” 2. On facts, the assessment, with which we are concerned, is of July, 2006 coming within the assessment year 2006-2007. An inspection of the business premises was conducted and a shop inspection report prepared. The assessee accepted the offence and compounded the same. In the assessment proceedings for the purpose of best judgment assessment the crime file was taken note of. The suppression detected with respect to the unaccounted sales as discernible from the SIR was added to the total turnover. An equal amount was added to cover up the probable suppression that could have been carried out by the assessee. On the basis of the additions made, the purchase turnover was computed at 80% of the additions made for suppression. 3. We are not concerned with the quantum additions made, which have led to some modification at the First Appellate and Tribunal stage. We are only concerned with the question, whether the tax payable by the assessee on the suppressed purchase value under S.6(2) of the Act of 2003 is liable to special rebate under S.12 of the said Act. 4. The issue is no longer res integra and is covered by Sulthan Gold International. The learned Government Pleader urged that Sulthan Gold International has been wrongly decided, especially drawing an analogy from Venus Marketing v. State of Kerala 2011 (3) KHC 687 . Sulthan Gold International considered identical facts in which 80% of the addition made on sales turnover was treated as purchase suppression and tax demanded under S.6(2) of the Act of 2003. The learned Government Pleader urged that Sulthan Gold International has been wrongly decided, especially drawing an analogy from Venus Marketing v. State of Kerala 2011 (3) KHC 687 . Sulthan Gold International considered identical facts in which 80% of the addition made on sales turnover was treated as purchase suppression and tax demanded under S.6(2) of the Act of 2003. Therein also, the argument taken was that S.12 of the Act of 2003 specifically employs the words ‘tax paid’ and hence, only when there is a proper payment of tax made and a rebate claimed in the return, could there be a computation of net tax, allowing the special rebate under S.12 of the Act of 2003. 5. The learned Government Pleader before us also stress the significance of the words employed in the provision. We, however, do not think that there can be any undue significance placed on the words ‘tax paid’ in the provision. Even in a case where there is no suppression detected; the assessee on the basis of the purchases made and sales effected in a month files the return before the 10th of the next month. The rebate is claimed in the return and only the net tax is paid. A dealer making purchases and selling the entire quantity in a month would show the purchase tax liability and the tax payable on sale in the returns. However, he does not have the liability to pay both, since the net tax payable would be the total tax payable on sale and on purchase minus the tax payable on purchase. This is a circumstance very much in contemplation and there cannot be any undue significance given to the words ‘tax paid’. 6. The attempt of the learned Government Pleader is to argue that when suppression is detected and additions are made on that account, the assessee had not offered for tax any purchase on which tax is shown as paid in the returns and in such circumstances there could be no rebate granted under S.12 of the Act of 2003. We are unable to accept the aforesaid contention, not supported by a statutory provision. We agree with the dictum as laid down in Sulthan Gold International. The Division Bench notices that the provision under S.12 of the Act of 2003 does not specifically cover a situation of best judgment assessment after rejection of turnover returned. We are unable to accept the aforesaid contention, not supported by a statutory provision. We agree with the dictum as laid down in Sulthan Gold International. The Division Bench notices that the provision under S.12 of the Act of 2003 does not specifically cover a situation of best judgment assessment after rejection of turnover returned. The Division Bench looked at the concept of tax liability as per the provision and net tax payable by an assessee, whether it be shown in the return or made liable by reason of a best judgment assessment. 7. There is an argument advanced that the finding that sub-rule (5) of Rule 38 cannot be said to be clarificatory as Rule 38 before amendment did not deal with the special rebate under S.12 of the Act of 2003. Even if the said provision is not clarificatory, going by S.12 special rebate is allowable in so far as the liability fixed on the assessee for payment of tax under S.6(2) whether it be voluntarily returned or mulcted on best judgment assessment based on offence detected. The legislature could have very well, brought in a prohibition of special rebate, when best judgment assessment is resorted to; which is not brought in. 8. We also do not see any analogy that can be drawn from Venus Marketing. Venus Marketing was with respect to the input tax credit claimed by a presumptive dealer. With respect to presumptive dealers, there is a specific prohibition, in claiming input tax credit under S.11 of the Act of 2003. In the case of persons, who switch over from the presumptive regime to regular tax payment, there is an enabling provision under Rule 12 of the Kerala Value Added Tax Rules, 2005. An assessee, who is under the presumptive regime is to make an application pointing out his intention to changeover and from that time onward the assessee is entitled to input tax credit. Even when such changeover is allowed in the course of an year, the presumptive tax paid before the changeover is not entitled to input tax credit. The dictum anchors on the specific prohibition, in granting input tax credit, to presumptive dealers for the presumptive tax paid and there can be no analogy drawn when there is no such prohibition applicable for special rebate. 9. The dictum anchors on the specific prohibition, in granting input tax credit, to presumptive dealers for the presumptive tax paid and there can be no analogy drawn when there is no such prohibition applicable for special rebate. 9. The learned Government Pleader then relies on Mohammed Haji v. State of Kerala OT (Rev) No.113 of 2011) dated 20.07.2012 (T.A. Simon v. State of Kerala) There, even when the prohibition applicable to presumptive regime was not there; a Division Bench had held against the grant of input tax credit to a delinquent dealer is the argument. In Mohammed Haji, the Division Bench noticed the elaborate procedure under S.11 to claim input tax credit. It was held so: “8. The principle of strict construction would equally be applicable in the case of input tax credit and the procedural mandate in the provisions of Section 11 has to be necessarily satisfied. The tax sufferance proved by invoice, the quantum determinable from the books of accounts etc., are the essence of the claim for the benefit conferred by the Section in availing input tax credit. Input tax credit is in the nature of set-off of tax suffered thus ensuring the liability of the subsequent dealers only on the quantum of value addition. No dealer has a right to claim input tax credit independent of the provisions of Section 11. The set off so provided is in the nature of a concession. It is a benefit conferred on the assessee quite in harmony with the scheme of multi point levy of tax but confined to the value addition at each stage. The determination of the quantum of such credit from the books of accounts postulates proof of tax-sufferance in the purchase, the levy and collection of tax on the value addition at the subsequent sale and ensures such levy and collection at the point of any subsequent sale too. It constitutes a chain and any break would result in chaos. Hence the stipulations that the claim should be made with reference to the return period and the quantum should be determinable from the books of accounts should be strictly complied with. 9. It constitutes a chain and any break would result in chaos. Hence the stipulations that the claim should be made with reference to the return period and the quantum should be determinable from the books of accounts should be strictly complied with. 9. xxx x xxx The Scheme of the Act as noticed above would require the input tax credit to be claimed along with the return, supported by tax suffered invoices and the quantum of eligible credit being determinable as reflected from the books of accounts. The assessee has admittedly not disclosed the transaction in his books of accounts or his return nor has he filed any revised return.” 10. This procedural mandate distinguishes input tax credit allowable under S.11 from special rebate deductible under S.12. The claim under S.11 has to be supported by invoices; which in the instance of best judgment were suppressed and later detected. While input tax is a claim to be made by the assessee, special rebate is a deduction permissible in the return itself. Hence the assessing authority when determining the turnover and levying tax is obliged to grant the deduction to tax payable under sub-s.(2) of S.6 as special rebate. We hence reject the contentions raised by the State. 11. We are of the opinion that the assessee is entitled to special rebate on the purchases added to the turnover returned, on best judgment assessment. We do not think Sulthan Gold International requires reconsideration. We answer the questions of law in favour of the assessee and against the revenue and we dismiss the revision.