2019 (2) TMI 1548 - HC - VAT and Sales Tax

High Court emphasizes statutory provisions over equitable principles in tax appeal, overturns Tribunal decision.

STATE OF KERALA REPRESENTED BY THE DEPUTY COMMISSIONER OF LAW, COMMERCIAL TAXES, ERNAKULAM Versus SRI. MOHAMMED MUSTHAFA PROPRIETOR, ARAFA CERAMICS AND SANITARY WARES

The High Court held that the Tribunal could not apply equitable principles in a statutory appeal and emphasized adherence to statutory provisions. ... Input tax credit - grant of registration - Whether the dealer who applied for registration in the midst of the year could claim input tax credit for the business carried on previous to such grant of registration and input tax credit claimed for the purchases made prior to registration; especially in the context of the dealer having imports from the commencement of the business? - Held that:- The said benefits are only available to specific instances of the dealer being a presumptive dealer or paying tax under the compounded scheme. The same cannot be imported into a regular assessment carried out under Section 6 of the KVAT Act. We, hence answer the first question of law also against the dealer and in favour of the State. Whether the Tribunal could have imported equitable principles in a statutory appeal? - Held that:- We first answer the first question in the negative, since we are definite that the Tribunal could not have imported equitable principles into an appeal provided under the statute, especially when the Tribunal itself is a creature of the statute. The revision stands allowed setting aside the order of the Tribunal to that extent and restoring the order of the Assessing Officer. Issues Involved:1. Application of equitable principles in a statutory appeal.2. Claim of input tax credit for purchases made prior to registration and the dealer being an importer.Analysis:Issue 1: Application of equitable principles in a statutory appealThe High Court examined whether the Tribunal could apply equitable principles in a statutory appeal. The Court held that the Tribunal, being a creature of the statute, could not import equitable principles into an appeal provided under the statute. The Court emphasized that the Tribunal must adhere to the statutory provisions and cannot introduce equitable considerations in its decisions.Issue 2: Claim of input tax credit for purchases made prior to registration and the dealer being an importerThe Court considered the case where a dealer applied for registration in the middle of the year and claimed input tax credit for purchases made before registration. The Court noted that the dealer had two claims: one for exemption up to a certain limit and the other for input tax credit for pre-registration purchases. The Court found that the Tribunal had wrongly rejected the input tax credit claim for pre-registration purchases. The Court highlighted that if the dealer was an importer before registration, the turnover limit for registration would not apply. The Court also discussed specific provisions under the Kerala Value Added Tax Act related to retrospective registration in certain cases, emphasizing that such benefits are limited to presumptive dealers or those opting for the compounded tax scheme.In conclusion, the High Court allowed the revision, setting aside the Tribunal's order and reinstating the Assessing Officer's decision. The Court ruled against the dealer on both issues, emphasizing the statutory limitations and the inapplicability of equitable principles in statutory appeals. The parties were directed to bear their respective costs.