Input tax credit cannot be denied for return-delay, and forfeiture needs actual tax collection from the purchaser.

Input tax credit under the Karnataka VAT framework is treated as a substantive statutory set-off, and the note states that eligible credit is not lost merely because the claim was not reflected in the original or revised return within the filing period, where the Act itself does not impose a time bar. It also explains that forfeiture under the wrong-collection provision applies only when tax has actually been collected, or purportedly collected, from another person; a mere higher payment made by mistake does not satisfy that condition. On that reasoning, the dealer's credit claim was upheld and forfeiture was rejected.

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Issues: (i) Whether the dealer was entitled to claim additional input tax credit under the special rebating scheme notwithstanding that the claim was not made in the original or revised returns within the prescribed time; (ii) Whether the amount paid at a higher rate could be forfeited under Section 47 of the Karnataka Value Added Tax Act, 2003 when no tax had in fact been collected from the purchaser.

Issue (i): Whether the dealer was entitled to claim additional input tax credit under the special rebating scheme notwithstanding that the claim was not made in the original or revised returns within the prescribed time.

Analysis: The statutory scheme treats input tax credit as a set-off against output tax and does not prescribe a time limit for claiming eligible credit. Section 14 permits deduction of input tax at the lower rate notified by the Government, and the notification reduced the disallowance rate to 3% with effect from 01.04.2007. Section 35(4) governs revised returns, but it does not curtail the dealer's substantive entitlement to a statutory benefit merely because the claim was not corrected within the return-filing period. The earlier decisions relied on by the authorities were distinguished on facts because those cases involved non-bona fide conduct or inordinate delay.

Conclusion: The dealer was entitled to the additional input tax credit, and the denial of that benefit was unsustainable.

Issue (ii): Whether the amount paid at a higher rate could be forfeited under Section 47 of the Karnataka Value Added Tax Act, 2003 when no tax had in fact been collected from the purchaser.

Analysis: For forfeiture under Section 47(1) and (3), the amount must have been collected by way of tax or purporting to be tax from another person. On the facts found, the dealer had not collected the tax from the purchaser, and the higher payment resulted from a mistake. In the absence of actual collection from the purchaser, the statutory conditions for forfeiture were not met.

Conclusion: The forfeiture under Section 47 was illegal and could not be sustained.

Final Conclusion: The revision succeeded, the substantial questions of law were answered in favour of the dealer, and the tribunal's order was set aside to the extent it went against the dealer.

Ratio Decidendi: A dealer cannot be denied a substantive statutory input tax benefit merely because the claim was not corrected within the return period, where the Act does not impose such a time bar, and forfeiture under the wrong-collection provision is permissible only when tax has actually been collected from another person.

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