Input tax credit restriction for mixed output streams upheld where accounts failed to segregate local sales and stock transfers.

Input tax credit was restricted because the assessee failed to produce clear accounts or records showing that the credit related only to local purchases used for goods sold within the State and not to stock transferred outside the State. In the absence of proper bifurcation between intra-State sales and outside-State transfers, the claim could not be verified as falling wholly outside the restriction in the third proviso to Section 11(3) of the Kerala Value Added Tax Act. The concurrent factual finding that proportionate disallowance of input tax credit was justified was therefore not interfered with.

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Issues: Whether the assessee was entitled to input tax credit in the absence of clear accounts showing that the credit related only to local purchases of inputs used for goods sold within the State and not to goods stock transferred outside the State.

Analysis: The authorities recorded a consistent finding that no accounts or records were produced to establish a clear segregation between the two streams of output, namely sales within the State and stock transfers outside the State. In the absence of a proper bifurcation in the accounts, the claim could not be verified as falling wholly outside the restriction contemplated by the third proviso to Section 11(3) of the Kerala Value Added Tax Act. The Court found no reason to interfere with the concurrent factual findings that proportionate disallowance of input tax credit was justified.

Conclusion: The claim for full input tax credit was rightly restricted, and the issue was decided against the assessee and in favour of the revenue.

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