State Of Karnataka Through vs. M/S Bharati Retail Limited

A Co-ordinate Bench of this Court vide order dated 18.03.2020, admitted the petition with the following substantial question of law: "Whether the Tribunal erred in passing the impugned order by arriving at a conclusion that input tax credit is allowable in the hands of the respondent even if the credit has been claimed in returns filed for a month other than the month in which the purchases were effected?"

Having heard the learned Additional Government Advocate appearing for the Revenue and having turned the pages of the petition and also having adverted to the Co-ordinate Bench decision in the case of State of Karnataka v. Centum Industries Private Limited - (2014) SCC OnLine Kar 12109, we are inclined to allow the petition. Paragraph Nos.9 & 14 of the decision read as under: NC: 2025:KHC:1848-DB "

From a reading of the aforesaid provision it is clear that, output tax is a tax payable by any dealer on sale of goods made by him in the course of his business. Input tax is a tax collected by the registered dealer or payable under this Act on the sale to him of any goods for use in the course of his business. Sub- section (3) of Section 10 provides for calculating the net tax payable by the registered dealer. It provides that, the net tax payable by a registered dealer in respect of each tax period shall be the amount of output tax payable by him in that period less the input tax deductible by him as may be prescribed in that period and shall be accounted for in accordance with the provisions of this Act. Therefore, it is clear the word "in that period" specifies the period during which input tax is paid and output tax is payable and the same has to be accounted in accordance with the provisions of the Act. Sub-section (4) makes it clear that, for the purpose of calculating the amount of net tax to be paid or refunded, no deduction for input tax shall be made unless a tax invoice, debit note or credit note, in relation to a sale, has been issued in accordance with Section 29. 14. In the instant case, the assessee paid input tax for the month of June 2006. In the returns filed in July 2006 he did not put forth any claim. He also did not file any revised return within 6 months putting forth the said claim. That is the period prescribed under law under Section 35 (1) and 35 (4) of the Act. It is only in the return filed in the month of February 2007, after the expiry of the aforesaid period, he put forth the said claim. Therefore, the assessing authority as well as the first NC: 2025:KHC:1848-DB Appellate Authority rightly held that the claim for input tax rebate put forth for the first time in February 2007 for the period of June 2006 cannot be allowed. However, the Tribunal without reference to the statutory provisions proceeds on the assumption that allowing input tax is a statutory promise made to the dealer buying the goods from the registered dealer by paying that tax mentioned in the tax invoice. There is nothing in law stipulating that if input tax is not claimed during the month succeeding the month in which purchase is effected, the dealer would forfeit his claim to claim input tax. In coming to the said conclusion, the Tribunal has not applied its mind to sub-section (3) of Section 10 which is the provision which determines the net tax payable by a registered dealer in respect of each tax period in arriving at tax liability the amount of output tax payable by the assessee in that period less the input tax deductible by him as may be prescribed in that period and accounted for in accordance with the provisions of the Act. If the assessee is not putting forth a claim for input tax deduction in the return filed in July 2006 nor as he put forth such a claim in a revised claim which he could have filed within 6 months there from his right to claim input deduction is lost. He cannot for the first time in the returns filed in February 2007 put forth a claim for input tax deduction as the said return was not related to the tax period during which the input tax was paid. In that view of the matter, the Tribunal has not applied its mind to the aforesaid provision and ignoring the mandate of law has allowed the said deduction erroneously. Therefore, the said finding recorded by the Tribunal cannot be sustained and accordingly it is hereby set aside. The question of law raised is answered in NC: 2025:KHC:1848-DB favour of the revenue and against the assessee."

The question of law framed in the petition on the basis of which it had been admitted for consideration has to be and accordingly answered in favour of the Revenue and against the Assessee.