(2012) 251 KLR 762 IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON THURSDAY, THE 29TH DAY OF MARCH 2012/9TH CHAITHRA 1934 WP(C).No. 20770 of 2006 (V) ----------------------------------- PETITIONER(S): ------------------- K.K.ABRAHAM & COMPANY, BHARATH PETROLEUM DEALERS, M.G.ROAD, KOCHI-35 (REPRESENTED BY THE PARTNER, MARIAM VARGHESE). BY ADVS.SRI.VIJAYAN. K.U. SRI.K.N.SREEKUMARA RESPONDENT(S): --------------------- 1. SALES TAX OFFICER, KGST, IST CIRCLE, ERNAKULAM. 2. COMMERCIAL TAX OFFICER, KVAT, IST CIRCLE, ERNAKULAM. 3. STATE OF KERALA, REPRESENTED BY THE SECRETARY (TAXES), GOVT. SECRETARIAT THIRUVANANTHAPURAM. 4. COMMERCIAL TAX OFFICER (AUDIT ASSESSMENT), COMMERCIAL TAXES, ERNAKULAM. 5. INSPECTING ASSITANT COMMISSIONER, COMMERCIAL TAXES, ERNAKULAM AT KAKKANAD. BY GOVT. PLEADER SRI. SHAIJ RAJ THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 29-03-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX PETITIONER'S EXHIBITS:
RESPONDENT'S EXHIBITS:
/TRUE COPY/ P.A. TO JUDGE. svs (C R) P.R.RAMACHANDRA MENON,J. ========= = = = = = = = = W.P.(C) No. 20770 of 2006 = = = = = = = == = = = = = Dated this the 29th day of March, 2012 Head Note:- Kerala Value Added Tax Act, 2003 - Sections 11(12) & 11(13) - Whether the petitioner partnership firm is entitled to have the benefit of input tax credit on the opening stock of the goods as on 1-4-2005, in respect of the petroleum products other than petrol and diesel, despite the fact that, the petitioner firm came into existence only much after the relevant period? Held:- With regard to the statutory prescription, in so far as Section 11 (12) and Section 11 (13) are categoric, there cannot be any ambiguity in this regard and if at all any benefit is to be obtained, the parameters specified under the provisions have to be complied with. Since, the provision clearly says that the benefit is available only to the 'registered dealers' as on the relevant date and since the petitioner admittedly does not have any case that the petitioner firm was a registered dealer as on 31-3-2005, there cannot be any doubt in this regard and stands outside the ring. J U D G M E N T Whether the petitioner partnership firm is entitled to have the benefit of input tax credit on the opening stock of the goods as on 1-4-2005, in respect of the petroleum products other than petrol and diesel, despite the fact that, the petitioner firm came into existence only much after the relevant period, is the issue to be considered and dealt with in this case. 2. The petitioner firm is a dealer and distributor of the petroleum products marketed by M/s. Bharath Petroleum Company Limited. Earlier, the outlet was being operated as a 'proprietor-ship concern' belonging to one Mr.K.K Abraham, who took his last breath on 23-11-2004. On demise of the owner, the legal heirs took over the business as a running concern, by forming a partnership. Present petitioner is a different entity, as five of the earlier partners were subsequently excluded and the firm is now being run just by two persons, as the partners. 3. The grievance of the petitioner originates from the time when the petitioner submitted necessary application for availing the benefit of input tax credit in the year 2006. It is stated that the petitioner had applied for obtaining the registration under the KVAT Act, and was granted registration, with effect from 1-4-2005, as per Ext.P3 dated 16-3-2006. However, the claim preferred by the petitioner as borne by Ext.P5 was stated as not acceptable to the department, and the said position was conveyed to the petitioner vide Ext.P6 series show-cause notices under Section 22(1) of the KVAT Act stating that the petitioner, being not a registered dealer at the relevant time, it could not be acceded to. The petitioner submitted Ext.P7 representation/reply dated 2-6-2006 before the Commercial Tax Officer, who issued Ext.P6 series notices. The petitioner, in the meanwhile, had submitted an application for registration under Section 13 of the KGST Act, before the first respondent on 31-5-2006, along with Ext.P8 covering letter for granting registration under the KGST Act from 24-11-2004 to 31-3-2005, so as to make the petitioner eligible to claim the benefit of input tax credit, thus seeking for regularisation of the benefit as a registered dealer . The first respondent replied the same vide Ext.P9 dated 2-6- 2006, pointing out that the petitioner was never a registered dealer as on the relevant date, and so as to make anybody eligible for the benefit, one has to be a 'registered dealer' as contemplated under the relevant provisions of law. The petitioner was also alerted of the fact that only the registered dealers as on the relevant date, would be having the right to be carried over automatically, to the newly introduced KVAT system, which was not case of the petitioner. Thereafter, the petitioner was served with Ext.P10 revised notice dated 20-6-2006, specifically referring to the rejection of the claim in Form 25 A filed on 31-3-2006, as the petitioner was not a registered dealer as on 31-3-2005, which was the 'sine qua non' to have 'automatic carry forward' under the KVAT Act, in relation to registration. Further proceedings were issued in respect of the liability sought to be mulcted upon the petitioner, when the petitioner approached this Court by filing the above writ petition. 4. During the pendency of the above writ petition, taking note of the lapse on the part of the petitioner, the assessment was finalised as per Ext.P13 and the liability was accordingly sought to be realised by issuing Ext.P4 demand notice . This made the petitioner to amend the writ petition by filing I.A No 1698 of 2008, which was allowed and matter is now taken up for final hearing. A counter affidavit has been filed on behalf of the respondents 1 and 2, rebutting the averments in the writ petition, particularly as to the eligibility of the petitioner and the statutory prescription in this regard. It is stated that the proceedings pursued and finalised by the concerned respondents are perfectly within the fours walls of law and not liable to be intercepted on any count. 5. The learned Counsel for the petitioner however submits that the idea and understanding of the respondents is not correct, and that the petitioner is entitled to have the benefit as a matter of right; more so, since the law does not specifically mention that 'registration' is mandatory to have the benefit of input tax credit. Reference is made to Section 11(12) and 11(13) of the KVAT Act which are extracted below. "Sec 11(12) of the Act:- 12) A registered dealer who intends to clam input tax credit under this section shall, for the purpose of determining the amount of input tax credit, maintain the accounts and such other records as may be prescribed, in respect of purchases, supplies and sales effected by him in the State. Sec 11(13) of the Act:- 13) Subject to the provisions of sub-sections (4) to (7) and sub-sections (9) to (12) , input tax credit shall be allowed to a registered dealer in respect of the tax paid under the Kerala General Sales Tax Act, 1963 (15 of 1963) where the tax paid by the dealer who sold the goods to such registered dealer or by any previous seller, or the Kerala Tax on Entry of Goods into Local Areas Act, 1994(15 of 1994), in respect of goods purchased by him during a period of one year immediately preceding the date of commencement of this Act, subject to such conditions and restrictions as may be prescribed where such goods are i) held as opening stock on such date and sold or used in the manufacture of taxable goods or used in the execution of works contract or used as containers or packing materials for the packing of taxable goods in the state for sale thereafter; or ii) used in the manufacture of taxable goods or as packing materials for the packing of taxable goods and such manufactured or packed goods are held as opening stock on such date; or iii) used in the manufacture of taxable goods and are held as opening stock on such date as work in process." 6. A mere reading of the above provisions clearly reveals that the benefit contemplated therein is intended to the registered dealers and not to anybody else. Admittedly, the petitioner was never a registered dealer on the relevant date ie, on 31-3-2005. True, out of the commodities dealt with by the petitioner, the issue is confined only with regard to the 'lubricating oil', as petrol and diesel are outside the purview of the KVAT Act. It is also stated that the petitioner has filed necessary returns under both the statutes, in respect of the concerned commodities and that the petitioner was under the impression that no separate application was necessary to have registration, particularly under the KGST Act, which was the only reason for delay. The contention is that the petitioner shall not be non-suited on the above ground, more so when the petitioner was given to understand that the defect could be rectified; which made the petitioner to deposit the 'registration fee' along with the 'compounding fee' for the delay, thus remitting a total sum of Rs.35,000/-. The learned Counsel for the petitioner also places reliance on two decisions rendered by this Court reported in Sales Tax Officer vs. Kerala Curry House (2010 (36) VST 126) and Chandra Interiors vs. State of Kerala (2011 (44) VST 100) in support of the case. 7. With regard to the statutory prescription, in so far as Section 11 (12) and Section 11 (13) are categoric, there cannot be any ambiguity in this regard and if at all any benefit is to be obtained, the parameters specified under the provisions have to be complied with. Since, the provision clearly says that the benefit is available only to the 'registered dealers' as on the relevant date and since the petitioner admittedly does not have any case that the petitioner firm was a registered dealer as on 31-3-2005, there cannot be any doubt in this regard and stands outside the ring. The only question is regarding the applicability, if any, of the judicial precedents cited above. 8. Coming to the decision in (36) VST 126 (cited supra), the concerned dealer who started the business with effect from 1-4-2007 submitted application for registration only on 19-5-2008. A compounding fee of Rs.31,278/- was collected by the department for carrying out the business without registration and the offence was compounded accordingly. After compounding the offence, an application for correction of the application for registration was filed, to substitute the date of commencement of business from 1-4-2008 (given in the said application) to 1-4-2007, which was the actual date of the commencement of business. A learned Judge held that the party was eligible to have retrospective registration from the date of commencement of the business; against which appeal was preferred, which was being considered by the learned Judges in the said case. 9. It was noted that Section 16 (2) of the Act prior to the amendment provided that the registration shall take effect only after the date of filing the application for registration. But later, it was substituted adding 'proviso' to the following effect: "Provided that registration shall be deemed to have been granted with effect from the date of commencement of business irrespective of the date of application, for the purposes of,- (a) paying tax under sub-section (5) of section 6, subject to eligibility , and (b) opting for payment of tax under section 8 for the relevant years subject to eligibility: Provided further that new dealers applying for registration and existing dealers having registration may avail this benefit subject to the condition that they shall pay tax under the respective provisions along with interest and will not be entitled for any refunds relating to the period prior to filing of application for registration: Provided also that in the case of dealers against whom an offence has been detected under section 67 of the Act before filing application for registration, registration shall be granted under this sub-section subject to the finalisation of the proceedings in respect of the offence so detected." The above amendment actually came into effect only from 1-4-2009, whereas the dealer was granted registration on 24-9-2008 with effect from 1-4-2008. It was the said certificate which was sought to be corrected, for getting the registration with effect from 1-4-2007. This was vehemently opposed by the appellant/department, which in turn was virtually accepted by the Division Bench in principle. However, analysing the scope of the 'proviso', it was made clear that, as per the new proviso, the registration granted will have retrospective effect from the date of commencement of the business, only for the purpose of 'clauses (a) and (b)' of the said proviso which enabled the eligible dealer to pay the tax on presumptive basis under Section 6(5) of the Act, and also dealers eligible for payment of tax under Section 8, irrespective of the fact whether the dealer was carrying on business during that year without registration. Subject to the said limited benefit conferred under clauses (a) and (b) of the proviso, it was categorically held that, a dealer had no right to claim retrospective registration, by making an application for correction of the certificate of registration. From the above, it is clear that the above decision does not come to the rescue of the petitioner, who claims the benefit of input tax credit without being a registered dealer as on 31-3-2005. 10. Coming to (44) VST 100, it was a case where the petitioner started business in supplying the materials to industrial units in the 'special economic zone', in the year 2006, though registration under the KVAT Act was obtained only in the year 2009. The purchaser in the 'special economic zone' gave Form No.43 prescribed under Rule 12C of the KVAT Rules, 2005, to enable the petitioner to claim exemption on the supplies made to it. However exemption was declined by the department for the year 2006-07, on the ground that the petitioner was not a registered dealer under the KVAT Act when the supplies were made. After discussing the facts and figures and relevant provisions of law, it was observed by the Bench that the reliance placed by the department was more with reference to the 'form' concerned and that there was nothing to indicate in Section 6(7) or Rule 12 C of the Rules, that in order to grant exemption, the supplier should be a 'registered dealer' at the time of making the supply. It was in the said circumstance, that the case projected by the dealer was entertained and appropriate relief was extended, which does not support the case of the petitioner in any manner; for the plain reason that Section 11 (12) and 11 (13) make it explicitly clear that the benefit contemplated therein can be claimed only by a 'registered dealer' and never by anybody else. 11. Yet another important aspect to be considered is as to the 'identity' of the person concerned. Admittedly, the business was being run earlier, as a 'proprietorship concern' by one Mr. K.K.Abraham, who expired on 23-11- 2004. It is also conceded in the writ petition that, on his demise, a partnership deed was executed with the widow of the deceased, three daughters and the husbands of the daughters as aforesaid, as the partners and the business was taken over accordingly. It was much later, that the present partnership came into existence by re-constituting the firm, excluding 'five' erstwhile partners and it is the new partnership firm who has approached this Court. This being the position, it cannot be said that the present writ petitioner was carrying on the business of the deceased proprietor from 24-11-2004 till 31-3-2005. Admittedly since the present partnership took its breath for the first time only much later, the petitioner was never an entity before the concerned respondents/authorities anytime before and it cannot be said that the petitioner firm is entitled to have the input tax credit as a matter of right, irrespective of the mandate under the statute, by entertaining the application preferred in January 2006 for retrospective registration under the KGST Act. This Court finds that the writ petition is ill-conceived. None of the grounds raised in support the same is tenable. It is dismissed accordingly. P.R.RAMACHANDRA MENON. JUDGE smm |
