Advance tax under an anti-evasion circular cannot be treated as input tax absent a purchase transaction.

Advance tax collected under an anti-evasion circular on timber brought into Kerala did not qualify as input tax because it was not tax paid on a purchase transaction between registered dealers in the course of business. As the goods were only stock-transferred outside the State and there was no taxable sale, the restriction and refund mechanism under Section 13 of the Kerala Value Added Tax Act, 2003 did not apply to deny full credit. The assessee was therefore entitled to credit for the entire amount paid under Circular No. 50/2006, and limiting credit to the amount in excess of 4% was unsustainable.

---

---

Issues: Whether advance tax collected under Circular No. 50/2006 on timber brought into the State and subsequently stock-transferred outside the State could be treated as input tax so as to attract the restriction under Section 13 of the Kerala Value Added Tax Act, 2003.

Analysis: Circular No. 50/2006 was issued to collect advance tax at border check posts on evasion-prone commodities and expressly permitted adjustment of the amount against output tax due. The definition of input tax under Section 2(xxiii) of the Kerala Value Added Tax Act, 2003 contemplates tax paid by a registered dealer to another registered dealer on purchase of goods in the course of business. The tax collected under the Circular was not tax paid on a purchase transaction within that definition. Since the goods were only stock-transferred and there was no taxable sale transaction, the refund and restriction mechanism in Section 13 of the Kerala Value Added Tax Act, 2003 had no application to deny the full credit of the advance tax paid.

Conclusion: The restriction of credit to the amount in excess of 4% was unsustainable and the assessee was entitled to credit for the entire amount paid under Circular No. 50/2006.

Ratio Decidendi: Advance tax collected under an anti-evasion circular on import of goods does not become input tax unless it answers the statutory definition of input tax as tax paid on purchase in the course of business.

---