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1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE Dated this the 20th day of April, 2012 THE HON*BLE MR JUSTICE D V SHYLENDRA KUMAR AND THE HON*BLE MR JUSTICE K GOVINDARAJULU 9o2011 BETWEEN: M/S MAFIENDRA APPLIANCES REP, BY ITS PA. HOLDER MR LALITH KUMAR NO.6. BVK AYYANGAR ROAD, BANGALORE 560 053 APPELLANT [By M/s,M N Shankare Gowda & Manjunath R, Advs, for M/s,Vasan Associates, Adv, ,1 AND: TFIE STATE. OF KARNATAKA THROUGH THE COM.MISSIONER OF COMMERCIAL TAXES, VANIJTA ‘IHERIGE KARYALAVA 1ST MAIN ROAD, GANDHINAGAR BANGALORE - 560 009 THIS APPEAL IS FILED UNDER SECTION 66(1) OF THE KX’Ai ACT AGAINSI rUE REVISION ORDER DDDD 18 122010 PASSED IN NOZACO/BNG/SMRJ8/201001 LA rUE FILE OF PHE ADDL COMMISSIONER OF COMMERCIAL ‘IAXES ZONRII BANCALORE RESTORING rUE RE ASSESSMEN’I ORDER PASSED FOR MARCHDOO7 SE ITING ASIDE THE APPEAL ORDER AND
2 RESIORING PENAL’IN LEVIED L/SE( 72(2). \( (‘ORDPGIX (‘ONCLI DING THE RbVISIO PRO(EE[)iNGS A\D ER TillS APPEAL COMING 0 POR DISPOSAL, FillS l)A\ SBYLENDRA KUM4R J. DELIVERED TIlE P01 LO\Vl\G. JUDGMENT Appeal under Section 66(1) of the Karnataka Value Added Tax Act. 2003 [for short, the Acti by a dealer who deals with home appliances. The appeal is directed against the order dated 18 12 2010 passed by the Additional Commissioner of Commercial Taxes, Zone I, l3angalore in proceedings No ZAC l/BNG/SMR 18/2010 11, exercising suo moW revisioiial juridietion. rcvisiIu the order passed by the Joini Commissioner of Ciirnmeria1 Tax-’s (Appeals). BanUalore, who had in turn 1k cci i he appeal ci I he appellant dc aler aganist as net ii ordc lat d 1 1 2 200 e Ni g the t IX Ii lie a Ic fo 200
3 2. The assessee was filing monthly returns as per the provisions of section 35111 of the Act and the Rules and had all been accepted as such. 3. It appears there was a search of the premises and the examination of the accounts books of the assessee as on 2.11.2007 which had revealed that the value of the purch&ses made by the dealer were not same as per the returns, but books Indicated a different figure, particularly. there was a difference In valuation to the extent of ?lO,89.270.58/- on the purchases effected by the assessee from its selling dealers. The assessee explained the difference to be the discount offered; that his selling dealers were giving a special rebate to the assessee by fixing certain sales targets; that as the assessee was achieving the sales target and was having a turnover beyond the target and being pleased by efficient levels of the assessee, selling dealers had offered a rebate to the assessee and the difference of ?l0,89,270.58/- In terms of the purchase value as indicated in the monthly
4 returns and the figure as was available in the books of accounts in the trading account of the assessee was the rebate that selling dealers had allowed to the assessee in view of Its good business performance. 4. The assessee had produced credit notes representing this difference in value and issued by different selling dealers to It. but the authorities had noticed such credit notes had not been accompanied with commensurafe tax credit notes and therefore while concluding the assessment for the period of March 2007 and having noticed that the value was the same for entire twelve months period, disallowed the input credit proportionate to the difference In value, namely. the value of ?10,89,270.58/- and the commensurate input tax rebate/credit of fl,36,158/- and concluded by reopening the assessments and rejecting the claim of input credit as claimed In the twelve monthly returns.
5 5. rieved by this order where under the assessee had been denied an input tax rebate to the extent of l .36, i58/, the assessee preferred an appeal to the Joint Commissioner of Commercial Taxes [Appeals], Bangalore. 6. The Appellate Commissioner took the view that as the assessee was able to produce the credit notes issued by the selling dealers specifying the quantum of incentive/rebate allowed in favour of tlie assessee and had also confirmed that they had not reversed the input tax thereon as was ori.inally paid, non issue or non production of tax credit notes cannot make any difference and therefore allowed the appeal on this aspect. directing the assessing authority to recompute the tax iiabi.hty of the assessee on the premise that. the assessee was entitled to .reta.in full input credit c.la.imed as per ii..s iet.urns. 7. The Additiorai Comniissioi icr e[ Commercial Taxes. Zo.ncd, P.d.tngalore. who rn.a,ic,ed t.hi.s orde.r, wa.s of the vi.cw a .—
6 that the order was not only erroneous, but prejudicial to the interest of the revenue to the extent of extending an Incorrect excess Input tax credit to the assessee and therefore after issue of notice to the assessee, set aside the order of the Joint Commissioner of Commercial Taxes (Appealsj and restored the order of the assessing authority. 8. It is aggrieved by this order, the present appeal. 9. Appearing on behalf of the appellant, submission of Sri. Shankare Gowda, learned counsel Is that the Commissioner could not have, In the first Instance, revised the order in exercise of his revislonal jurisdiction as even assuming that the order can be characterized as erroneous one for not claiming the input tax credit strictly in conformity with the rules such as not filing a revised return within six months etc., nevertheless, the order of the Appellate Commissioner had not resulted In any prejudice to the revenue as there was no revenue loss to
7 the Department. particularly, as selling dealers of the assessee had certified that they had not reversed their entry. in respect of the tax collected by them from the assessee inclusive of the incentive amount and which had already been passed on to the Department. 10. It is also urged that though revised return reflecting the rebate or incentive, allowed in favour of the assessee had not been filed, subsequent confirmation of the same from the different selling dealers was good enough to accept the claim of the assessee and therefore the order passed by the Additional Commissioner of Commercial Taxesi cannot be sustained and should be set aside; that there is no suppression or incorrect entries made in the books of accounts as the rebate/concession totaling a sum of?1O,89,270.58/- has in fact taken by the assessee as forming part of its profit under the provisions of the Income Tax Act, 1961 and It is therefore. submitted that no lack of bonafide can be attributed to the assessee in claiming commensurate input tax credit and therefore the ‘I.
8 assessing authority could not have reduced the Input credit as claimed by the assessee. 11. On the other hand. submission of Smt. S Sujatha, learned Additional Government Advocate Is that the assessee had not filed aiy revised returns indicating the reduction In the purchase value of the goods; that even assuming that the assessee had paid tax without reduction of the amount, it is a situation where the selling dealer will be collecting an excess tax than what is permitted In law and to the extent of such difference In tax amount, the assessee can never claim Input credit of the tax, but the assessee had claimed all along only on the full value whereas the purchase was excluding the amount of flO,89,270.58/- and to that extent the avaliment Itselfwas not In accordance with law. 12. It is also submitted that not filing revised return within the stipulated tIme precludes the assessee from claiming any such input credit over and above the tax
9 liability even assuming that the rebate had been given. accepting the return as originally filed by the assessee would result In an anomalous situation such as when an assessee is purchasing certain goods at a lesser price, but purports or claims to have paid tax on a higher sale price and later when such goods are sold at a price which Is less than the original purchase price. but above the discounted price. the total tax liability will be at a price less than the purchase price and therefore would enable the assessee to claim refund of the difference though in law the assessee Is not entitled to and therefore also the situation warranted Interference by the Additional Commissioner and for correcting the erroneous order passed by the Joint Commissioner of Commercial Taxes L&ppealsl. 13. We have examined the orders passed by the original authority, appellate authority and the revisional authority
10 and bestowed our attention to the submissions made at the Bar. 14. In tax matters, both the liability for payment of tax and the entitlement either for refu.nd or in the present case for claiming any input credit can only be strictly in accordance with law and the tax liability does not vary depending upon the understanding of the parties or even on the internal arrangements between the selling dealer and a buying dealer. 15. Insofar as the liability of the assessee in respect of the purchases made by hi.m and the tax paid thereon is concerned, it can be availed as input tax credit which can only be the precise l.iability and precise amount and not anything more. if the boo.ks of accounts of the assesee ndlcated that there was a difference in the amounts as indleated in the returns and as indicated in the t..rading aec.ount and to the tune of 1O8927O•58T, then it is obvious that this dId. not constitute t.he purchase. va..iue of
11 the assessee, did not constitute part of the turnover and therefore even an assumption that the assessee has paid taxes on that and therefore the assessee is entitled to claim Input credit to this extent is not permitted in law. as it is not the actual liability of tax, but something which either the assessee perhaps or may not have revealed to the department, but assuming that it was so done, it does not in any way change the liability or quantum of tax that has to be paid and in turn that can be claimed by way of input tax credit 16. However, this legal position of availing input tax credit without reducing the discount amount is not a true or proper computation of the tax liability of the assessee and an amount which could have been claimed as input tax credit. 17. On the other hand, when the assessee had claimed in all the twelve monthly returns on such premise and such wrong availment came to the notice of the fr
12 Department only because of audit visit by the Department and on an inspection of the books of accounts and even otherwise the returns filed as it was assumed intact and deemed to have been accepted and all the more when it became necessary for the assessing authority for reopen and make adjustments for difference of the amount as reflected in the trading account of the assessee, it cannot be said that the situation was not one which can be said to the detriment of the revenue. 18. If the assessing authority had rightly reassessed the amount and had denied a wrongly availed Input tax credit, allowing of such a claim by the appellate commissioner on the assumption that such tax amount could have been actually paid by the assessee and oil the strength of certain confirmation certificate issued by the selling dealers, is, in our opinion, not merely an erroneous . conclusion, but one which can be characterized as prejudicial to the interest of the revenue
13 as it is the situation of an excess tax credit allowed In favour of the assessee. 19. The manner of Issue of credit and debit notes being governed by the provisions of section 30 of the Act and Rule 31 of the Karnataka Value Added Tax Rules, 2005 there cannot be a claim for an input tax credit otherwise than by following the procedure contemplated under section 30 of the Act read with Rule 31 of the Rules. In the instant case, it is not In dispute that the assessee’s selling dealers had not followed this procedure but had instead Issued credit notes and affirming letters for not reversing entries relating to tax collected by them and adjusting amount etc.. which is not In strict compliance with the statutory provisions. 20. Even otherwise, we find that the whole practice of assessee or dealers claiming such rebates or discounts appear to be rather unrealistic, particularly, as the assessee Is admittedly a dealer dealing In home
14 appliances and has been making purchases from different sources and different manufacturers. To accept that all such sellers would have been following uniform policy of allowing such rebate or discount Is a claim which appears to be a tall claim and therefore should be made good to the hilt and not which can be merely assumed or presumed. Moreover, when the law requires certain compliances and fulfillment and assuming that the assessee could have claimed the existence of such factual position, If have claimed such a relief only by filing revised monthly returns within the stipulated time and if had not complied with the same, but nevertheless, seeking for retention of the same Input tax credit, In our opinion, firstly It is not permitted In law and secondly when the trading account indicated a situation different from the monthly returns ified by the assessee. When the assessee has filed revised rebirn but had not chosen to file one, it does indicate that the assessee had not claimed an input tax credit which perhaps otherwise the assessee
15 might have been entitled to, but not claimed In a manner not envisaged in law and therefore disallowing the same, in our opinion, cannot be characterized as ifiegal as was done by the assessing authority. 21. The Additional Commissioner of Commercial Taxes even In the exercise of revislonal jurisdiction cannot be said to have exceeded his jurisdiction nor has unnecessarily Interfered with the order passed by the Joint Commissioner of Commercial Taxes [Appealsi, Bangalore. 22. It is therefore, we dismiss this appeal. Sd! JUDGE Sd! JUDGE pjk. AN/ N’