Prospective tax clarification: prior VAT guidance continued for earlier transactions, with refund entitlement preserved for excess remittances.

A later administrative clarification under the Kerala Value Added Tax Act was upheld but treated as operating prospectively, because earlier Division Bench decisions had already rejected the challenge to the underlying tax position on sales by Domestic Tariff Area dealers to Special Economic Zone units. The Court held that transactions completed before 30.08.2013 continued to be governed by the earlier clarification dated 15.09.2007, and any amount remitted in excess under that earlier position could be claimed by refund. The appeals were dismissed, with relief limited to prospective operation of the later clarification and preservation of prior-period rights.

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Issues: (i) Whether the impugned clarification issued under the Kerala Value Added Tax Act, 2003 could be sustained and whether it operated retrospectively. (ii) Whether the appellants were entitled to be governed by the earlier clarification for the period prior to 30.08.2013 and to claim refund of any excess amount remitted.

Issue (i): Whether the impugned clarification issued under the Kerala Value Added Tax Act, 2003 could be sustained and whether it operated retrospectively.

Analysis: The challenge to the clarification had already been rejected in earlier Division Bench decisions upholding the view that sales by registered dealers in the Domestic Tariff Area to units in the Special Economic Zone do not qualify as deemed exports, and that the relevant entitlements are governed by the statutory provisions applicable to such sales. In the present matter, the Court accepted that those earlier decisions remained unchallenged and saw no reason to take a different view. At the same time, the Court recognized that the later clarification modified the earlier position only from the date it was issued.

Conclusion: The challenge to the impugned clarification failed, and it was treated as operating prospectively.

Issue (ii): Whether the appellants were entitled to be governed by the earlier clarification for the period prior to 30.08.2013 and to claim refund of any excess amount remitted.

Analysis: Since the impugned clarification was held not to have retrospective effect, the Court held that the period prior to 30.08.2013 continued to be governed by the earlier clarification dated 15.09.2007. On that basis, the Court accepted that any amount remitted in excess of what was permissible under the earlier clarification could be claimed back by way of refund.

Conclusion: The appellants were held entitled to be governed by the earlier clarification for the prior period and to obtain refund, if any excess amount had been remitted.

Final Conclusion: The appeals were dismissed, but the appellants succeeded to the limited extent of securing prospective operation of the impugned clarification and preservation of their rights under the earlier clarification for the prior period, including refund of excess remittances.

Ratio Decidendi: A later administrative clarification modifying tax treatment will not be given retrospective effect unless expressly authorized, and the prior clarification continues to govern transactions completed before the later clarification came into force.

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