Credit Available On Advance Tax Paid For Stock-Transferred: Kerala High Court

The Kerala High Court has held that the petitioner will be entitled to credit for the entire amount paid in terms of Circular No. 50/2006 for the goods in question, which were stock-transferred to its branch office in Pollachi.The bench of Justice Gopinath P. has observed that a combined reading of the provisions of Circular No. 50/2006 and the definition of input tax in Section 2(xxiii) of the KVAT Act indicates that the tax paid in terms of Circular No. 50/2006 cannot assume the character of input tax.Circular No. 50/2006 relates to the imposition of advance tax on evasion-prone items under the Kerala Value Added Tax Act, 2003.As per Section 2(xxiii) of the KVAT Act, 2003, “input tax” means the tax paid or payable under this Act by a registered dealer to another registered dealer on the purchase of goods in the course of business and includes the tax paid on the purchase of materials for research and development in relation to any goods.Section 13 of the KVAT Act relates to the refund of input tax in the case of an export or interstate sale.The petitioner/assessee is in the business of importing and selling pincoda timber, which is imported from the Far East through ports at Tuticorin, Mangalore, or Kochi. Depending on the requirements at the branch in Pollachi or at the head office in Feroke, imported timber is transported to Pollachi or Feroke from the ports of arrival. During the years 2009–2010, the petitioner had effected stock- transfers of certain timber from Feroke to Pollachi. The value of the stock, so transferred by way of stock transfer, was Rs. 39,24,347. In a notice issued to the petitioner under Section 25(1) of the KVAT Act, it was indicated that, in respect of the stock, which was transferred from Feroke to Pollachi, the petitioner would be entitled to credit in respect of the advance tax paid in terms of Circular No. 50/2006 dated December 18, 2006, only to the extent such tax was in excess of 4%. Though the petitioner objected to the restriction of credit in the manner indicated above, by Ext.P3 order dated April 16, 2012, the assessment of the petitioner for the years 2009–2010 was completed by restricting the credit of advance tax paid in terms of the aforesaid Circular No. 50/2006 to any amount paid in excess of 4%. The officer found justification for such a restriction under the provisions of Section 13 of the KVAT Act. The petitioner challenged the order to the extent that it restricts the credit of advance tax paid under Circular No. 50/2006 to any amount paid in excess of 4%. The petitioner contended that, with reference to the provisions of Circular No. 50/2006, in respect of goods mentioned in that notification, advance tax was collected at Border Check Posts on the premise that these goods were susceptible to tax evasion. A reading of the circular will itself indicate that the tax paid in terms of the provisions contained in the said circular (at the rate of 12.50% for timber) is clearly not a tax on sale or purchase and is a tax collected as advance tax. The court noted that there was no taxable transaction entered into by the petitioner, and the goods in question had only been stock transferred to the Branch Office of the petitioner at Pollachi. Section 13 of the KVAT Act deals with the refund of input tax credit in the case of export or interstate sale.The court held that order, to the extent it denies credit to the entirety of the tax paid by the petitioner in terms of Circular No. 50/2006 and in respect of goods stock-transferred to Pollachi, cannot be sustained in law.Counsel For Petitioner: P.Raghunath Counsel For Respondent: Thushara JamesCitation: 2024 LiveLaw (Ker) 396Case Title: Hillwood Furniture Pvt. Ltd Versus The Assistant CommissionerCase No.: WP(C) NO. 12701 Of 2012Click Here To Read The Order

Credit Available On Advance Tax Paid For Stock-Transferred: Kerala High Court

Mariya Paliwala

Tags