Karnataka High Court

The State Of Karnataka vs Mukund Limited on 18 December, 2023

Author: S.Sunil Dutt Yadav

Bench: S.Sunil Dutt Yadav

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                                                            STRP No. 100009 of 2023




                           IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH

                                 DATED THIS THE 18TH DAY OF DECEMBER, 2023
                                                  PRESENT
                                THE HON'BLE MR JUSTICE S.SUNIL DUTT YADAV
                                                    AND
                                THE HON'BLE MR JUSTICE VIJAYKUMAR A.PATIL
                               SALE TAX REVISION PETITION NO. 100009 OF 2023

                        BETWEEN:
                        THE STATE OF KARNATAKA
                        REPRESENTED BY ITS JOINT COMMERCIAL TAXES
                        (APPEALS) DAVANGERE AND ANOTHER
                                                                        ...PETITIONER

                        (BY SRI.GANGADHAR.J.M. AAG A/W SMT. GIRIJA HIREMATH, HCGP)

                        AND:
                        MUKUND LIMITED
                        HOSAPETE ROAD,
                        GINIGERA,
                        KOPPAL DISTRICT- 583228
                                                                       ...RESPONDENT

                        (BY SRI.T.SURYANARAYA, SENIOR COUNSEL FOR
           Digitally
           signed by
           SHIVAKUMAR
                        SRI. H.R.KAMBIYAVAR, ADVOCATE AND SRI. JITENDRA C.P,
SHIVAKUMAR HIREMATH
HIREMATH   Date:        ADVOCATE)
           2023.12.21
           10:39:52
           +0530
                             THIS STRP FILED U/SEC. 65(1) FO THE KARNATAKA SALES
                        TAX ACT, 1957, PRAYED THAT THIS HON'BLE COURT MAY KINDLY BE
                        PLEASED TO ALLOW THE SALES TAX REVISION PETITION AND SET
                        ASIDE THE IMPUGNED ORDERS PASSED BY THE HON'BLE
                        KARNATAKA APPELLATE TRIBUNAL DATED 25.01.2023 IN STA
                        NO.74/2018 AND 75/2018 IN THE INTEREST OF JUSTICE AND
                        EQUITY.

                             THIS PETITION, COMING ON FOR ADMISSION, THIS DAY,
                        S.SUNIL DUTT YADAV, J., MADE THE FOLLOWING:
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                                     STRP No. 100009 of 2023




                          ORDER

The petitioner has assailed the correctness of the

orders dated 25.01.2023 passed by the Karnataka

Appellate Tribunal, Bengaluru in STA No.74/2018 and STA

No.75/2018.

2. By virtue of the order passed in the above

mentioned STAs, the tribunal has allowed the appeals, set

aside the orders passed by the first appellate authority

and the assessing authority while remanding the matter

back to the assessing authority to pass fresh orders by

accepting the Net Input Tax Credit declared by the

appellant at Rs.7,20,92,631-00 in the monthly return turn

over in Form VAT-100 for the months of July to October

2014. Direction was passed remanding the matter back to

the assessing authority to allow Input Tax Credit of the

invoices of the previous months claimed in subsequent

months, in terms of the decision reported in 2018 (90)

KGST.L.J 2019 (Kirloskar Electric Co. Ltd., Vs. State

of Karnataka) and the circular bearing No.15/2017-18

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dated 08.02.2018, within three months from the receipt of

this order.

3. The brief facts that are made out in the revision

petition are that, the Assistant Commissioner of the

Commercial Taxes had passed an order in refund

proceedings and as against such refund proceedings, the

appeals were filed before the Joint Commissioner of

Commercial Taxes, Davanagere Division and against such

order STA Nos.74/2018 and STA No.75/2018 came to be

filed before the Karnataka Appellate Tribunal, challenging

the order dated 10.01.2018 passed by the Joint

Commissioner of Commercial Taxes (Appeals).

4. The question in these proceedings relate to

belated claim of Input Tax Credit which was disallowed by

the revenue on the ground that, such belated claims for

the Input Tax Credit could not be entertained.

5. The assessee had claimed that, in the light of

absence of any period of limitation fixed under Section

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10(3) of the Karnataka Value Added Tax Act, 2003 (for

short KVAT Act) to claim Input Tax Credit, the same was

indefeasible right. The procedure prescribed for claiming

Input Tax Credit, cannot take away the substantive right

to claim Input Tax Credit.

6. Learned Senior Counsel Sri. T.Suryanarayana,

appearing on behalf of the respondent-Assessee would

submit that, the tribunal has rightly considered the matter

and the question of belatedly claiming of Input Tax Credit

is no more res-integra as the same is now considered by

the order of the Division Bench in STRP No.234/2016 in

the case of M/s. Bharat Earth Movers Limited Vs. The

State of Karnataka, wherein the order of the learned

Single Judge in Kirloskar Electric Co., Ltd., Vs. State of

Karnataka has been upheld and accordingly submits in

the light of the legal position emanating from the order

passed in STRP No.234/2016 holding that, there is no time

limit prescribed under Section 10(3) of the KVAT Act for

availing Input Tax Credit, the order of the tribunal does

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not call for interference and no question of law arises and

accordingly, the revision petition is to be dismissed

summarily.

7. Learned AGA appearing for the State would

submit that, the matter requires consideration as re-

assessment proceeding have been taken up against the

assessee. It is further submitted that, as against the

orders following the train of Judgments in Kirloskar

Electric Co., Ltd., the State intends to file an appeal.

8. Heard both sides.

9. It must be noticed at the outset that,

admittedly the question is as regards the delayed claim of

Input Tax Credit in terms of Section 10(3) of the KVAT

Act.

10. Learned Single Judge in the case of Kirloskar

Electric Co., Ltd., Vs. State of Karnataka, (2018) 90

taxmann.com 157 (Karnataka), has considered the

point in detail and had framed a question which is detailed

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at paragraph No.4 of the aforesaid Judgment which reads

as follows:

"4. The questions which arise are:

(i) Whether the claim of deduction or set off of Input Tax Credit against Output Tax liability of the dealer can be restricted or denied on the ground of any time frame within which such Sales Invoices on the basis of which ITC is claimed should pertain or information or record of such ITC Invoices should be informed in the Returns to be filed, particularly if such time frame is restricted to the period of 'Tax Period' which can be as short as a month or a quarter, or the period of filing of Returns being 20 days from the end of month concerned or maximum six months from the end of 'Tax period' even for filing of Revised Returns disclosing errors and omissions?

(ii) What is the true meaning and purport of Section 10(3) of the KVAT Act, 2003 vis-

à-vis Section 35 of the same Act, 2003?

11. Both the said questions have been answered by

the learned Single Judge holding that, the right under

Section 10(3) is a indefeasible right and in the absence of

any time limit prescribed under Section 10(3) of the KVAT

Act, to claim Input Tax Credit, the order of tribunal did not

call for interference.

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12. The said order of the learned Single Judge was

the subject matter of the writ appeal, wherein in

W.A.No.101194/2016 came to be disposed of taking note

of the order of the Division Bench in STRP No.234/2016 in

the case of M/s. BEML Vs. State of Karnataka.

13. It is necessary to notice the observations made

in STRP No.234/2016 in the case of M/s BEML Vs. State

of Karnataka. The Division Bench after detailed

consideration has laid down the legal position as follows in

paragraph No.32. From paragraph No.23 onwards are

extracted herein below:

23. In the connected appeal, M/s. Sonal Apparel Pvt Ltd. V. State of Karnataka & Ors in W.P.No.22483-22494/2015 dated 29.03.2016, the assesses have raised a common ground challenging the Section 10(3) of the KVAT Act, as ultra vires the Constitution of India as well as the object and Scheme of the KVAT Act.

24. The Hon'ble Single Judge, allowing the writ petition has held thus:

"A contention on behalf of the Revenue that a dealer is permitted to avail credit belatedly up to six months by revising the

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return under Section 35(4) of the KVAT Act, apparently drawing inspiration from the decision in Centum Industries case, is not relevant. It would not be possible to hold that Section 10(3) first restricts availment of credit to the same month as the month of purchase and then Section 35(4) goes on to permit the same by way of revision of return would be absurd construction. Such an interpretation would lead to the conclusion that the KVAT Act encourages availment of credit by the dealer without ensuring the eligibility for the same, as delay in availment would result in denial of credit altogether and thereafter rectifying any incorrect credit available by revising the return. Such a view could not have been the intention of the legislature as that would lead to a situation where filing of a revised return under Section 35(4) would become a rule, rather than an exception...

...Section 10(3) of the KVAT Act, prior to its amendment vide the Karnataka Value Added Tax (Amendment) Act, 2015, shall be read down to enable the petitioners to calculate the net tax liability by deducting the input tax paid on its purchases from its output tax liability, irrespective of the month in which the selling dealer raises invoices.

(Emphasis supplied)

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25. In Kirloskar Electric Co. Ltd. v. State of Karnataka, the facts are, the assessees claimed Input Tax Credit against the output tax liability in respect of the sales made by it in the year 2009-10. The Assessing Officer denied the claim on the ground that the input tax credit is deductible only in that 'Tax Period' during which the invoices of the selling Dealer is raised.

26. The Hon'ble Single Judge, has allowed the writ petition holding that:

"30. Both the questions framed above are therefore liable to be answered in favour of the petitioners assessees. The claim of ITC cannot be restricted and denied on the stated grounds by Revenue. It cannot be denied only because ITC claim is not made in respect of Sale Invoices which are not pertaining to same Tax Period, nor it can be denied on the ground that such claim is not made immediately in the month or months following the month of purchase of goods question. The machinery provisions of filing Returns Section 35 of the KVAT Act cannot defeat the substantive claims under Section 10(3) of the Act. The Revenue is entitled only to verify that the Sale Invoices are genuine and valid such ITC claim is not duplicate, fictitious or bogus. Article 265 of the constitution of India does not entitle the State to retain such tax paid by Selling

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Dealers and deny the claim of ITC credit or set off the hands the Purchasing Dealers who claim such against their Output Tax Liability when they sell goods further, incurring such Output Tax liability."

27. Feeling aggrieved by the decisions, the Revenue has filed Writ Appeals No.3176/2016 & connected cases.

28. Shri. Jeevan Neeralgi, learned AGA, for Revenue urged following contentions in this Writ appeal:

• That tax invoice is a document that supports the input tax for period in which the invoice issued;

• that in the State of Karnataka v. M/s. Centum Industries and M/s Infinite Builders and Developer, Bangalore V. The Additional Commissioner of Commercial Taxes, this Court has clarified that the words "in that period" under Section 10(3) provides the period in which input is paid and output tax is payable and the same has be accounted in accordance with the provisions of the Act;

• the Hon'ble Single Judge has erred holding that the un-amended Section 10(3) did not prescribe any time limit for availing input tax credit; • Section 10(3) read prior to April 01, 2015, mandatorily requires dealers to avail input tax credit only in the month in which the invoice is issued, and it was only after the amendment that dealers were permitted to avail

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credit of tax paid on purchases effected preceding five tax periods.

29. In the Kirloskar Electric (stated supra), the Hon'ble Single Judge, referring to Coilector of Central Excise, Pune v. Dai Ichi Karkaria Ltd. , has held that,

28. The Input Tax Credit under VAT law is pari-materia with the concept of CENVAT or MODVAT under Excise Law and dealing with a similar problem, the Hon'ble Supeme Court in the case of Collector of Central Excise, Pune Vs. Dai Ichi Karkaria Ltd., 1999 (112) E.L.T.853 (SC) held in paragraph 17 as under:

"17. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment 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

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concerned with credit that has been validly taken, and its benefits 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."

(Emphasis Supplied)

30. It is further held that:

29. Thus the claim of credit of input tax is indefeasible as was the case of CENVAT under Excise law and such credit of ITC under VAT law which is equivalent to tax paid in the chain of sales of the same goods, cannot be denied on the anvil of machinery provisions or even provisions relating to time frame which is law of limitation only bars the remedy rather than negativing the substantive claims under the taxing statutes.

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31. Thus, in view of the above recorded findings, we respectfully agree with the opinion of the Hon'ble Single Judge. The law laid down in Collector of Central Excise, Pune v. Dai Ichi Karkaria, Ltd (stated supra), has been time and again followed by the Hon'ble Supreme Court in several cases. Thus, it is settled that the input tax credit is an indefeasible right.

32. The main issue whether the assessees who have filed the returns belatedly entitled for input credit or not. A plain reading provision of Section 10(3) of the KVAT Act, 2003, shows that no time limit or restriction is prescribed for availing the input tax credit. In Dai Ichi Karkaria Ltd. (stated supra), the Apex court has held that credit is indefeasible. The Modvat credit is similar to Input Tax Credit in this case. Therefore, no exception can be taken to the view taken by the Hon'ble Single Judge that the Input Tax Credit cannot be denied on the anvil of the machinery provisions or the provisions relating to the time frame. Hence, in our considered view, the assessees shall be eligible to avail the input tax credit as and when the tax is paid by them, without any limitation of time."

14. In the present case, taking note of the law laid

down by the Division Bench in the STRP No.234/2016

clearly holding that the right to claim Input Tax Credit is a

indefeasible right and no time limit is prescribed under

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Section 10(3) of the KVAT Act for availing Input Tax

Credit, no exception could be taken for entertaining

belated claims.

15. In the light of the same and taking note of the

order passed in STRP No.234/2016 while taking note of

the questions considered by the tribunal, we find no