Input tax credit reversal for goods lost in business operations upheld under a clear statutory repayment rule.

Input tax credit is repayable where goods on which input tax has been deducted are not used in the course of business or are lost or destroyed, and Section 19(1) of the Karnataka Value Added Tax Act, 2003 was treated as clear and unqualified. Losses from spillage, handling, transportation, ground loss and moisture loss were held to fall within that rule to the extent the goods were not used in business, so proportionate reversal of input tax credit was upheld. Authorities' reliance on the statutory language was sustained, and the decisions cited by the taxpayer were distinguished on their facts and context.

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Issues: Whether input tax credit was disallowable on loss of iron ore due to spillage, handling, transportation, ground loss and moisture loss under Section 19(1) of the Karnataka Value Added Tax Act, 2003.

Analysis: Section 19(1) provides that where input tax has been deducted on goods and those goods are not used in the course of business or are lost or destroyed, the input tax becomes repayable. The provision was held to be clear and unqualified, and no exception was read into it on the basis of the nature of business or the manner in which the loss occurred. The claimed losses were treated as showing that the relevant goods were not used in the course of business to that extent, and the authorities' finding that proportionate input tax credit had to be reversed was upheld. The decisions relied on by the petitioner were distinguished on facts and statutory context.

Conclusion: The disallowance of input tax credit on the claimed loss of goods was upheld and the issue was answered against the petitioner.

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