Best judgment assessment under VAT law requires purchase tax rebate to be allowed when computing net tax payable.

In a best judgment assessment under the Kerala Value Added Tax Act, net tax liability must be computed after allowing rebate of purchase tax under section 12(1)(a). Rule 38(5), later inserted to recognise proportionate special rebate where turnover is determined on estimate, was treated as clarificatory rather than as creating a new right confined to later periods. On that basis, rebate remained available even for an assessment based on estimated turnover for an earlier return period, and the tax authority was directed to grant the purchase tax rebate against the tax payable.

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Issues: Whether rebate of purchase tax under section 12(1)(a) of the Kerala Value Added Tax Act read with rule 38(5) of the Kerala Value Added Tax Rules was available in a best judgment assessment made on estimated turnover for a period prior to the introduction of rule 38(5).

Analysis: Section 12(1)(a) provides for deduction of tax paid under section 6(2) in computing the net tax payable, and the statutory scheme contemplates net tax liability after allowing rebate on purchase tax. Though the section does not expressly refer to best judgment assessment, the liability remains one of net tax on sales turnover after giving credit for purchase tax. Rule 38(5), later introduced, expressly clarifies that proportionate special rebate may be given where turnover is determined by best judgment assessment. The rule was treated as clarificatory rather than as creating a new right limited to periods after its insertion.

Conclusion: Rebate of purchase tax was available even for the assessment based on estimated turnover for the return period August 2006, and the assessee was entitled to relief to that extent.

Final Conclusion: The assessment was sustained on turnover, but the tax authority was directed to grant rebate of purchase tax against the tax payable on the estimated sales turnover.

Ratio Decidendi: In a best judgment assessment under the Kerala Value Added Tax Act, the net tax payable must be computed after allowing rebate of purchase tax under section 12(1)(a), and a later rule expressly recognising that position is clarificatory.

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