The State Of Karnataka vs. M/S Biesse Manufacturing Co PVT LTD
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Cause title — parties, addresses and appearances
ORAL ORDER
(PER: HON'BLE MR JUSTICE KRISHNA S DIXIT)
Revenue is invoking the revisional juri iction of this court u/s.65(1) Karnataka Value Added Tax Act, 2003 for assailing Appellate Tribunal’s order dated 24.03.2021 whereby Respondent-Assessee’s Appeal in STA No.194/2019 having been favoured, in effect, he has been entitled to input tax credit; further the levy of interest and imposition of penalty have been set at naught. II. BRIEF FACT MATRIX OF THE CASE: (1) Assessee is a registered dealer under 2003 Act. He is engaged in the manufacture & sale of inter alia wood cutting machines and such other instruments that NC: 2025:KHC:8188-DB are employed in furniture industries. He had filed a Self Assessment Return u/s.38 of the 2003 Act for the Assessment Year 2011-12. The Assessing Authority having undertaken re-assessment u/s.39(1), rejected his claim for Input Tax Credit vide order dated 01.03.2018 on the ground that his selling dealers had not filed their returns nor discharged their output tax liability by remitting the tax amount to the department. (2) Assessee took the matter in appeal in VAT.AP No.205/17-18 u/s.62(6) of the Act and the First Appellate Authority vide order dated 24.04.2019 dismissed the appeal. Assessee, aggrieved thereby, preferred Appeal in STA No.194/2019 u/s.63 of the Act. The Tribunal vide order dated 24.03.2021 having favoured the appeal reversed the orders of Assessing Authority and the First Appellate Authority to the extent that the claim for Input Tax Credit was denied and interest & penalty were levied. This order has given rise to the revision at our hands. III. The Revision Petition is structured on the following questions of law: (1) Whether the Tribunal was right in allowing the Respondent’s Appeal and setting aside the disallowance of input tax credit claimed by the Respondent on purchases effected from dealers who had either been deregistered or had failed to discharge their tax liability on such sales? NC: 2025:KHC:8188-DB (2) Whether the Tribunal was right in allowing the Respondent’s Appeal and setting aside the disallowance of input tax credit claimed by the Respondent, despite the fact that the Respondent had utterly failed to discharge his burden under section 70 of the KVAT Act of proving the correctness and genuineness of such claim?
IV. SUBMISSIONS AT THE BAR: A. Arguments on behalf of the Revenue: (1) Learned AGA appearing for the Revenue vehemently argues that the Tribunal grossly erred in allowing the claim for Input Tax Credit and thereby voiding the levy of interest & penalty when there was absolutely no material on record evidencing the transactions in question and payment of tax on them made to his sellers; Sec.70(1) of 2003 Act imposes a heavy burden on the Assessee of proving genuineness of the transactions and payment of output tax to his sellers; this he has to do by vouching the movement of goods and not just producing invoices and bank statements; the Tribunal having treated the burden NC: 2025:KHC:8188-DB transactions in question required reasonable proof which the Assessee failed to furnish and therefore having denied the claim for Input Tax Credit had imposed both interest & penalty; the doubt gets legal character not only because of paucity of evidence to vouch genuineness of transactions, but when the sellers of the Assessee had not filed their returns and remitted the taxes to the department; that being the position the interference of the Tribunal was highly uncalled for.
B. SUBMISSIONS ON BEHALF OF ASSESSEE: (1) Learned Sr.Advocate Chytanya.S.S. appearing for the Assessee resists the petition making submission in justification of the impugned order of the Tribunal and the reasons on which it has been constructed. He submits that appeal to the Tribunal u/s.63 of 2003 Act is both on law & facts; the findings of fact recorded by the Tribunal are to be treated as final; a wealth of evidentiary material was loaded to the record to vouch genuineness of the transactions in question and payment of tax on the purchase made by the Assessee; the Tribunal having considered the same has entered the findings, that cannot be faltered by any principle or procedure; to claim Input Tax Credit, the proof of seller’s remittance of the tax is not a precondition unlike in other statutes. NC: 2025:KHC:8188-DB (2) Though Sec.70(1) of 2003 Act employs the expression ‘reasonable doubt’ and not ‘beyond reasonable doubt’, these proceedings being essentially civil in nature, general principles of evidence would apply and those principles inter alia relate to burden of proof, shifting of burden and preponderance of probability; the functionaries under the tax statutes cannot whimsically raise suspicion of transactions, although they are entitled to raise genuine doubts as to the assertion of Assessee on the basis of totality of facts borne out by record; both the Assessing Authority and First Appellate Authority proceeded on a wrong premises that the Assessee had not discharged shifted burden to prove genuineness of transactions and therefore the Tribunal has rightly interfered in appeal of the Assessee. Lastly he submits that the ‘questions of law’ framed in the revision do not arise in the fact matrix of the case.
IV. Having heard the learned counsel for the parties and having perused the petition papers, we decline indulgence in the matter for the following reasons: A. AS TO SCOPE OF APPEAL TO TRIBUNAL AND REVISION TO HIGH COURT UNDER CHAPTER VII OF 2003 ACT: (1) In our system, difference is conventionally maintained between Appeal and Revision. Right of Appeal NC: 2025:KHC:8188-DB is a creature of law, whereas such a terminology is alien being relevant is reproduced:
“31. We are in full agreement with the view expressed in Sri Raja Lakshmi Dyeing Works [Sri Raja Lakshmi Dyeing Works v. Rangaswamy Chettiar, (1980) 4 SCC 259] that where both expressions “appeal” and “revision” are employed in a statute, obviously, the expression “revision” is meant to convey the idea of a much narrower juri iction than that conveyed by the expression “appeal”. The use of two expressions “appeal” and “revision” when used in one statute conferring appellate power and revisional power, we think, is not without purpose and significance. Ordinarily, appellate juri iction involves a rehearing while it is not so in the case of revisional juri iction when the same statute provides the remedy by way of an “appeal” and so also of a “revision”.
(2) Chapter VII of 2003 Act contains the provisions for Appeals & Revisions. Appeal to the Appellate Tribunal is 2 (2014) 9 SCC 78 NC: 2025:KHC:8188-DB provided by section 63 which has as many as twelve sub- sections that fairly indicate the scope, grounds, limitation & procedure. On the other hand, Section 65 provides for Revision by High Court ‘in certain cases’. Section 65 has as many as twelve elaborate provisions. The entire section is reproduced for ease of understanding:
“65. Revision by High Court in certain cases.-
(1) Within [one hundred and Eighty days] from the date on which an order under sub-section (5) or (8) or (9) of Section 63 was communicated to him, the appellant or the respondent may prefer a petition to the High Court against the order on the ground that the Appellate Tribunal has either failed to decide or decided erroneously any question of law:
(2) The High Court may admit a petition preferred after the period of 1[one hundred and Eighty days] aforesaid if it is satisfied that the petitioner has sufficient cause for not preferring the petition within that period.
(3) The petition shall be in the prescribed form, shall be verified in the prescribed manner, and shall, when it is preferred by any person other than an officer empowered by the Government under sub-section (1) of Section 63, be accompanied by a fee of one hundred rupees.
(4) If the High Court, on perusing the petition, considers that there is no sufficient ground for interfering, it may dismiss the petition summarily:
(5) The High Court shall not dismiss any petition unless the petitioner has had a reasonable opportunity of being heard in support thereof.
(6) (a) If the High Court does not dismiss the petition summarily, it shall, after giving both the NC: 2025:KHC:8188-DB parties to the petition a reasonable opportunity of being heard, determine the question or questions of law raised and either reverse, affirm or amend the order against which the petition was preferred or remit the matter to the Appellate Tribunal with the opinion of the High Court on the question or questions of law raised or pass such other order in relation to the matter as the High Court thinks fit.
(b) Where the High Court remits the matter to the Appellate Tribunal under clause (a) with its opinion on questions of law raised, the latter shall amend the order passed by it in conformity with such opinion.
(7) Before passing an order under sub-section (6) the High Court may, if it considers necessary so to do remit the petition to the Appellate Tribunal and direct it to return the petition with its finding on any specific question or issue.
(8) Notwithstanding that a petition has been preferred under sub-section (1), the tax shall be paid in accordance with the assessment made in the case.
(9) If as a result of the petition, any change becomes necessary in such assessment, the High Court may authorize the prescribed authority to amend the assessment and the prescribed authority shall amend the assessment accordingly and thereupon the amount overpaid by the person concerned shall be refunded to him without interest or the additional amount of tax due from him shall be collected in accordance with provisions of this Act, as the case may be.
(10) (a) The High Court may, on the application of either party to the petition, review any order passed by it under sub-section (6) on the basis of facts which were not before it when it passed the order. NC: 2025:KHC:8188-DB (b) The application for review shall be preferred within such time and in such manner as may be prescribed, and shall where it is preferred by any person other than an officer empowered by the Government under sub-section (1) of Section 63 be accompanied by a fee of one hundred rupees.
(11) (a) With a view to rectifying any mistake apparent from the record, the High Court may, at any time within five years from the date of the order passed by it under subsection (6), amend such order.
(b) The High Court shall not pass an order under this sub-section without giving both parties affected by the order a reasonable opportunity of being heard.
(12) In respect of every petition preferred under sub-section (1) or (10), the costs shall be in the discretion of the High Court.”
(3) Section 65 of 2003 Act specifically states that Revision is available ‘in certain cases’. Such an expression is not employed in section 63A and section 64 which too provide for revision respectively to the Joint Commissioner and to the Additional Commissioner/Commissioner. This cannot be sans any significance. Since in Indian legislative practice, even titles to the sections are voted, they are part of the statute, although they may not control the substantive provisions. Sub-section (1) employs the expression ‘Tribunal has either failed to decide or decided erroneously any question of law’ and therefore, involvement of a question of law is a sine qua non for invoking/exercising the revisional juri iction. The NC: 2025:KHC:8188-DB Revisionist has to demonstrate either the question of law raised in the appeal before the Tribunal has been left undecided or that it has been erroneously decided. We will come to this aspect of the matter a bit later. Sub-section (2) prescribes 180 days as limitation period and provides for condonation of delay on sufficient cause being shown. Sub-section (3) prescribes the form of Revision and payment of a court fee of Rs.100/- when Revisionist is the Assessee. Sub-section (4) provides for summary dismissal of Revision if no grounds do exist; however, Sub-section (5) mandates a reasonable opportunity of being heard. Sub-section (6) provides that the court has to determine the question of law raised, after hearing both the parties. Court may reverse, affirm or amend the order put in Revision; it may remand the matter on the question(s) of law. In moulding the relief, court has more discretion than otherwise since this provision says that court may also make such other order as it thinks fit. Sub-section (7) empowers the High Court to call for a report of findings on any specific question or issue. The payment of tax is not exempted merely because Revision is filed, says Sub- section (8).
(4) In terms of order on Revision, Assessment Orders have to be modified and any excess payment has to be refunded to and any deficit is to be made good by the Assessee, says Sub-section (9). Sub-section (10)(a) NC: 2025:KHC:8188-DB provides for review of the order made on Revision on the basis of facts that were not there when the Revision was decided. Sub-section (10)(b) empowers the government to make rules prescribing limitation period for Review and the manner in which Review should be preferred. Sub-section (11) is on par with section 152 of Code of Civil Procedure, 1908 and it provides for rectification of mistakes in the order made in Revision. This would include order made in review as well. Rectification can be sought for at any time within five years; before effecting rectification, stakeholders need to be heard. Sub-section (12) provides for discretionary levy of cost while making orders on Revision.
B. AS TO WHAT IS A QUESTION OF LAW WITHIN THE MEANING OF SECTION 65 OF THE ACT:
(1) Now, let us come to the substantive provision of Revision to High Court, namely sub-section (1) of Sec.
Textually, it requires a question of law that was raised but the Tribunal has ‘failed to decide’ or ‘decided erroneously’. Therefore, we have to examine as to what is meant by ‘question of law’. Salmond’s Jurisprudence3, says that all questions that arise before court are broadly of four types: (i) questions of law, (ii) questions of fact, (iii) questions of opinion & (iv) questions of discretion. We are not much concerned with item Nos.(ii), (iii) & iv). Salmond further
3 12th Edition by P J Fitzgerald, pages 65 to 70 NC: 2025:KHC:8188-DB says that ordinarily, a question assumes the character of law, if answer to that has to be found by turning the pages of statute book. However, that would be too restrictive an approach when it comes to the realm of adjudication process like this, in the light of statutory provisions. By now, it is well settled that a question may be treated as of law even if in Salmondian sense, it is not: when a finding of fact is recorded without evidence or contrary to evidence or founded on inadmissible evidence, ordinarily they are treated as questions of law. It may also arise when, on the basis of evidentiary material on record, no reasonable person in the armchair of the authority would have entered a finding, that has a bearing on the outcome of the proceeding. These are only illustrative.
(2) We have also noted a broad proposition canvassed by the learned AGA that in a statutory hierarchical setup of Appeal/Revision, when concurrent findings have been recorded by the Assessing Authority and the First Appellate Authority, on mixed questions of law & facts the Tribunal exercising appellate power should not readily undertake their deeper examination, of course subject to all just exceptions. However, we do not fully subscribe to this view, having discussed the scope of appeal to the Tribunal u/s.63 of 2003 Act and having specifically held that such appeal is both on law and facts. Having said this, let us examine the findings of the Tribunal to the NC: 2025:KHC:8188-DB extent it relates to challenge to the order in the light of questions framed.
C. AS TO THE RELEVANT FINDINGS OF TRIBUNAL: (1) The Tribunal apparently has looked into orders of Assessing Authority and of First Appellate Authority along with evidentiary material on which they were constructed. We cannot find fault with this approach in the light of our
discussion above. We are reproducing factual findings that come to the rescue of Assessee and on the basis of material on record, we cannot readily dislodge the same. “34. The appellant at the time of hearing, in support of its claim of input tax for the transaction effected with the aforesaid selling dealers (twenty two in number) for the tax period in question has produced selling dealers wise (twenty two in number), the photo extract of purchase ledge, extract of Bank Statement to show that the transaction have place through Banks.
The perusal of the documents coupled with the payments made by the appellant to the registered selling dealers (twenty two in number) prima-facie establishes the occurrence of a transaction between the appellant and the selling dealers. No doubt under the scheme of statue, the Burden is on the appellant/dealer, who claims input tax credit to prove the validity of the transaction. However Burden of proof is not static but shifts once the initial Burden is discharged. NC: 2025:KHC:8188-DB
In the present case on hand, the appellant has placed ample material to establish that a transaction as required under the statute has occurred. From the documents placed on record, it can be deduced (a) that the documents pertain to the relevant tax period. (b) that the details of payment, proved that the payment is made to the particulars selling dealer out of the total selling dealers (twenty two in number) for the relevant tax period. Hence the payment made by the appellant of the tax period in question is therefore not in dispute and enforces the fact that the primary most and necessary implication to prove that there has been a transaction between the seller dealer and the appellant is met with. Hence this implication satisfies the initial burden cast upon the appellant by the statue.
As already discussed above, the seller dealers (twenty two in number) with whom the appellant has effected transactions during the period in question, have all got a Valid TIN number during the relevant tax period. However, even though it is the contention of the authority below that the selling dealers (twenty two in number) have under declared their sales turnover by either filing a nil return or not filing the return, the payment details furnished by the selling dealers (twenty two in number) and the same filed by the learned counsel shows that the payments have been received by the appellant for the relevant tax period.
It goes without saying that, in view of the settled position of law, that once the appellant has discharged the initial burden by producing the invoices reflecting the TIN number of the selling dealer, it is for the authorities below to refute the same by placing necessary NC: 2025:KHC:8188-DB documents regarding the authenticity of the transaction and the details of deregistration of the dealer if any, at the relevant point of time. It is pertinent to note that this is the second appeal and the respondents have not made any earnest effort to place relevant piece of evidence to demonstrate the fact of deregistration of the selling dealer during the relevant tax period to substantiate their stand. In the absence of any documentary evidence regarding the deregistration of the above selling dealers the presumption regarding the registration tilts in favour of the appellant.” (2) The Tribunal comprises of a District Judge Member and a Commercial Tax Member. It has to follow the normative procedure which would include compliance with the principles of natural justice. It has to adhere to the principle of parity in the treatment of subjects/individuals, in the sense that like cases should be decided alike. What it has observed at paragraph 48 assumes importance: “Further has held that "if the selling dealer defaults in remitting tax to state ex-chequer the tax collected by him, the buying dealer cannot be prevented from taking credit of tax paid on his purchase as input tax credit. Loss of revenue caused by default of one dealer held, cannot be made good by mulcting another". It is further ruled "that were assessee has paid tax due on purchase from the registered dealer as evidenced by tax invoices issued by that dealer, he was entitled to utilize the same as input tax credit while discharging its tax liability on sale of NC: 2025:KHC:8188-DB his finished product and preventing him from utilizing the credit, held was without authority of law". No case is made out by the Revenue that the Tribunal in the fact matrix of the case has discretion to disobey the ratio in VINAYAKA CASHEW supra. The Tribunal being a statutory adjudicatory body, in the matchable fact matrix of cases, cannot have inconsistent stand, unless there are demonstrable factors that justify the contrary. D. AS TO APPROACH OF TAX AUTHORITIES TO EVIDENTIARY ASPECT OF THE MATTER: (1) True it is, that when the seller has not filed the return or made remittance of tax to the department, the Assessing Authority can justifiably doubt the genuineness of transaction of the assessee in general and payment of tax made by him on the purchase of goods from the seller, in particular. However, once sufficient evidentiary material is loaded to the record to vouch genuineness of the transactions, such material inter alia being Purchase Invoices, Purchase Register, Purchase Ledger, Bank Statement, etc., the authorities cannot readily entertain doubt, unless this evidentiary material itself is found to be spurious or otherwise insufficient. That is not the case of Assessing Authority or the First Appellate Authority. Learned AGA banked upon ECOM GILL supra to highlight heaviness of burden resting on the shoulders of Assessee NC: 2025:KHC:8188-DB in proving the transaction and payment of tax thereon. This decision at para 23 has observed as under: “…The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The aforesaid information would be in addition to tax invoices, particulars of payment etc. In fact, if a dealer claims Input Tax Credit on purchases, such dealer/purchaser shall have to prove and establish the actual physical movement of goods, genuineness of transactions by furnishing the details referred above and mere production of tax invoices would not be sufficient to claim ITC…” The above decision does not come to the aid of Revenue inasmuch as the Assessee has furnished every information about the sellers including their TIN numbers. What all has been produced by the Assessee has been duly discussed by the Tribunal inter alia in paragraph nos. 24, 26 & 28, as reproduced above. We repeat that the cogent evidentiary material placed on record by the Assessee is not at all doubted unlike in the decision cited.
(2) Mr.Chytanya is right in invoking the maxim ad impossibilia nemo tenetur. It is presumed that the law does not compel doing of impossibilities. Therefore a statutory provision fastening a duty is construed as not NC: 2025:KHC:8188-DB applying to a case where its performance is or becomes impossible, for reasons not attributable to the person. (i) CRAIES ON ‘STATUTE LAW’4 has the following write up: “Under certain circumstances compliance with the provisions of statutes which prescribe how something is to be done will be excused. Thus, in accordance with the maxim of law, Lex non cogit ad impossibilia, if it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the persons interested had no control, like the act of God or the King’s enemies, these circumstances will be taken as a valid excuse…”.
(ii) In BROOM’S LEGAL MAXIMS5 it is printed as under: “The law itself and the administration of it, said Sir W.Scott, with reference to an alleged infraction of the revenue laws, must yield to that to which everything must bend, to necessity; the law, in its most positive and peremptory injunctions, is understood to disclaim, as it does in its general aphorisms, all intention of compelling to impossibilities, and the administration of laws must adopt that general exception in the consideration of all particular cases. “In the performance of that duty, it has three points to which its attention must be directed. In the first place, it must see that the nature of the necessity pleaded be such as the law itself would respect, for there may be a necessity which it would not. A 4 7th Edition, Sweet & Maxwell-1971 page 268 5 10th Edition, Sweet & Maxwell, Indian Economy Reprint 2006 at pages 162, 163 NC: 2025:KHC:8188-DB necessity created by a man’s own act, with a fair previous knowledge of the consequences that would follow, and under circumstances which he had then a power of controlling, is of that nature. Secondly, that the party who was o placed used all practicable endeavours to surmount, the difficulties which already formed that necessity, and which, on fair trial, he found insurmountable. …”.
(iii) MAXWELL ON INTERPRETATION OF STATUTES6 says: “A section may be imperative as regards the voluntary action of parties, but not so where such events happen that its provision cannot be attended to. … Enactments which impose duties on conditions are, when these are not conditions precedent to the exercise of a juri iction, subject to the maxim that lex non cogit ad impossibilia aut inutilia. They are understood as dispensing with the performance of what is prescribed when performance of it is idle or impossible. …”
E. NO PRESUMPTION THAT BUSINESSMEN ARE UNSCRUPULOUS:
(1) The submission of learned AGA that the authorities in the light of accumulated expertise may entertain doubt as to the genuineness of transactions, cannot be outrightly rejected. However, it again is subject to qualification: they cannot function on a premise that every businessman is a shady character and invariably does things spuriously. A 6 Sweet & Maxwell, 11th Edition, 1966 at pages 372, 373. NC: 2025:KHC:8188-DB presumption of innocence, howsoever week, should obtain as of necessity, in a civilized society. It is not that there are no unscrupulous beings; a small section does exist in every branch. One has to keep in mind what is the rule and what are the exceptions. The authorities cannot go on doubting everything, mindlessly. Spree of skepticism is not shunned. Scriptures frown upon baseless doubting: ‘Doubting Thomas’7 is a Biblical expression. Bhagavad Geeta8 says: ‘Samshayaatma pranashyati’ nearly meaning that a person entertaining unfounded doubt withers away. Holy Quran says: Baselessly doubting is a serious disease9. (2) The above being said, an honest doubt arising from the material on record, cannot be faltered. It is only such doubt, law takes cognizance of. We hasten to add that the difference between doubt & suspicion, is in degrees. It is said: A sea of suspicion has no shore, and one that embarks upon it is without rudder or compass. It is a matter of delicate balance which has to be struck by employing wi om & expertise. There is no independent assessment of the evidentiary material produced by the Assessee for vouching his assertion. Simply saying that the burden of proof shifts on to the Assessee, without
7 Holy Bible verse (John) 20:24-29 8 Shloka 40 9 Surah Tawbah 9:125 NC: 2025:KHC:8188-DB mentioning the factors that impeach his evidence, does not make sense. Shifting of burden can happen only according to the general principles of evidence; there should be some reason or logic to shift the burden.
(3) A reasonable mind trained in the trade and sitting in the armchair of the Authorities should feel satisfied that the evidence adduced by the Assessee is insufficient or otherwise impeachable; only then, he may be required to adduce further evidence; if he fails to do that, then things fall apart to his disadvantage. Burden of proof shifts, depending upon quality & quantum of evidence adduced by the parties, does not mean that it keeps on oscillating like the pendulum of a clock. After all, tax laws do not exclude the principle of preponderance of probability. Reason is the very life of law. When the reason of a law once ceases, the law looses its essence. The terms ‘beyond doubt’ and ‘beyond reasonable doubt’ which is discussed in ECOM GILL supra have to be understood keeping this in mind. Viewed thus, approach of the Assessing Authority and of the First Appellate Authority that the sellers of the Assessee having not filed their Returns nor remitted the taxes collected from him, Assessee’s transactions in question would remain doubtful, is flawsome, to say the least. NC: 2025:KHC:8188-DB F. SELLER REMITTING TAX IS NOT A PRE-CONDITION FOR ASSESSEE CLAIMING INPUT TAX CREDIT:
(1) A perusal of the order of Assessing Authority and the order of the First Appellate Authority shows that they have been substantively structured on the premise that the sellers of Assessee have not filed Returns nor have they remitted the tax on the goods sold to the Assessee and therefore, Assessee cannot claim Input Tax Credit. Despite vehement submission, learned AGA is not in a position to show any provision of the Act or Rules which stipulates the condition that in the absence of proof of remittance of tax by the sellers to the Department, the Assessee cannot lay such a claim, whether one calls it a right or a concession or otherwise. If claim is made in the Return filed under section 38 of 2003 Act read with Rule 38 of 2005 Rules and it is supported by evidentiary material vouching payment of tax by the Assessee, Input Tax Credit cannot be denied.
(2) True it is that in a catena of decisions, Input Tax Credit is held to be a concession but certainly not a gratis. When concession is regulated by law, its wrongful denial ordinarily would give rise to an actionable claim. In other words, within the parameters of the statute, concession is justiciable, provided that conditions specified for claiming it are strictly complied with, if not substantially. An NC: 2025:KHC:8188-DB argument to the contrary if countenanced, may eventually
result into double taxation, which is not the object of 2003 Act. Let us see Section 10(5) of the Act which has the following text: “Subject to input tax restrictions specified in Sections 11, 12, 14, 17, 18 and 19, where under sub-section (3) the input tax deductible by a dealer exceeds the output tax payable by him, the excess amount shall be adjusted or refunded together with interest, as may be prescribed.” Broadly construed, this provision subject to the restrictions enacted in the enlisted sections, creates right to concession in terms of Input Tax Credit and such a right is justiciable. No Rule, Ruling or opinio juris is brought to our notice so support the contra contention. The ground on which claim is denied does not fall into even the penumbra of restrictions enacted in the specified provisions. In a Welfare State, statutory functionaries cannot invent novel ideas which do not accord with State Policy as enacted and thereby, deny relief to the deserving claimants. This is how the impugned order of the Tribunal has set right the injustice caused to the Assessee by the authorities.
(3) There is force in the submission of learned Sr. Advocte Mr.Chaitanya representing the Assessee that there is absolutely no indication either in the 2003 Act or in 2005 Rules that for maintaining the claim for Input Tax Credit, the sellers of Assessee should have remitted tax NC: 2025:KHC:8188-DB collected from him to the department on the goods bought by him. Ordinarily, such requirements are difficult to infer. Such a provision is enacted by the State Legislature in Section 16 of the Karnataka Goods and Services Tax Act, 2017. For the ease of reference, sub-section (1) & Sub- section (2)(c) of Section 16 are reproduced below: “(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,– (a) xxxxxx (b) xxxxxx (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply.”
A provision of the above kind is conspicuously absent in the 2003 Act and also in 2005 Rules, promulgated thereunder. A law of the kind cannot be readily inferred NC: 2025:KHC:8188-DB merely because it sounds laudable, strict construction Snb/ List No.: 1 Sl No.: 39
10 2024 LiveLaw (SC) 774
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.