Remanded

M/S. Appolo Tyres Ltd. v. State of Kerala

Kerala HC3 Jul 2018OT.Rev/14/2015

Case brief

AI extract

What is this about?

The High Court of Kerala held that the Assessing Officer must compute input tax credit on a monthly basis rather than annually for an assessee who reverses claims monthly. The Court found the Appellate Tribunal failed to address a key contention and remanded the matter to the AO.

What did the court decide?

Matter remanded to the Assessing Officer to compute input tax credit on a monthly basis.

M/S. Appolo Tyres Ltd. Vs State of Kerala — GST and Indirect Tax | Kerala HC (2018)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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THE HONOURABLE MR. JUSTICE ASHOK MENON

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TUESDAY, THE 3RD DAY OF JULY 2018 / 12TH ASHADHA, 1940

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AGAINST THE ORDER/JUDGMENT IN TAVAT 374/2013 of KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM DATED 28-08-2014

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REVISION PETITIONER(S)/PETITIONER

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M/S. APOLLO TYRES LTD. ERNAKULAM, REPRESENTED BY BALAKRISHNAN R., MANAGER ACCOUNTS.

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BY ADVS.SRI.HARISANKAR V. MENON SRI.MAHESH V.MENON SMT. MEERA V.MENON

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RESPONDENT(S)/RESPONDENT:

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STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM - 695 001.

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BY SRI.MOHAMMED RAFIQ, SR. GOVERNMENT PLEADER

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THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 03-07-2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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OT REV.14/2015

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APPENDIX

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PETITIONER'S EXHIBITS

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ANNEXURE-A : COPY OF ASSESSMENT ORDER PASSED BY THE ASST. COMMISSIONER (ASSESSMENT), SPECIAL CIRCLE-II, ERNAKULAM. ANNEXUFRE-B : COPY OF APPELLATE ORDER ISSUED BY THE DEPUTY COMMISSIONER (APPEALS), ERNAKULAM. ANNEXURE-C : COPY OF ORDER ISSUED BY THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM.

//TRUE COPY//

PS TO JUDGE.

jg-6/7

K.VINOD CHANDRAN & ASHOK MENON, JJ.

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O.T.Rev.No.14 of 2015

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------------------------------------------Dated this the 3^rd day of July, 2018

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O R D E R

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Vinod Chandran, J.

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The questions of law raised from the order of the Kerala Value Added Tax Appellate Tribunal as raised in the memorandum of revision are extracted hereunder:-

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“(a) Is not the order of the appellate tribunal a non-speaking one having not considered the contentions in their true perspective?

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(b) Has not the appellate tribunal failed to notice that the application of the annual ratio of total production/stock transfer value to determine reverse tax is illegal when the goods are purchased and input claimed/stock transfer effected on a monthly basis?”

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Question No.(c) raised on the aspect of special rebate is not pressed before us. We raise another substantial question of law as below:

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Whether the AO was correct in having computed the taxable and non-taxable purchases for the entire period, when obviously the ratio between the taxable and non-taxable purchases would vary from month to month and the sale of manufactured goods too; especially in the context of the assessee having conceded

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O.T.Rev.14/15

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reversal of the input tax credit on monthly basis?

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The appellant/assessee is manufacturer of tyres and tubes and has purchased locally, taxable and non-taxable raw materials. On the taxable raw materials, the assessee is entitled to input tax credit under Section 11 of the Kerala Value Added Tax Act, 2003 ('Act', for short). However, in the assessee's case, there are consignment sales where there is no tax effect and under Section 11 of the Act, proportionate raw material purchase and the tax paid cannot be claimed as input tax credit. The assessee has purchases on monthly basis and also makes sales on monthly basis. The return period as per the Act is a month, since the assessee is obliged to file returns before the 10^th of the succeeding month. The assessee hence on the basis of the transactions of the particular month filed returns claiming input tax credit and in the very next month reversed the input tax credit for such materials disposed of by the assessee without any tax effect to the State.

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O.T.Rev.14/15

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On best judgment assessment being taken up, the Assessing Officer computed the input tax credit which could be declined to the assessee on the basis of the taxable and non-taxable purchases for the entire year. The assessee's contention is that the computation made on an yearly basis would, in fact, show an artificial figure especially since the assessee had claimed the input tax credit as provided under subSection (3) of Section 11 every month reversing the claim, which was not sustainable on the very next month. In such circumstances, the assessee's contention is that even if a single order is passed on best judgment assessment, the computation has to be on a monthly basis.

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The assessee has relied on sub-clause (iv) of Rule 39(5) of the Kerala Value Added Tax Rules, 2005 ('Rules', of Short) which speaks of a best judgment assessment for a particular year relating to more than one return period being made by a single order. Hence, though a single order could be issued, it has to look at the computation on a monthly basis is the

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O.T.Rev.14/15

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contention, since a month is the return period under the Act and the Rules.

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We do not think that the aforesaid provision would apply especially since it is on audit assessment. However, the general scheme of best judgment assessment, which is indicated from the above provision would be applicable even if it is not an audit assessment. We are of the opinion that the matter has to be re-done by the Assessing Officer (AO) computing the input tax credit on a monthly basis with reference to the reversal made by the assessee itself on the next month.

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On the first question of law, we are of the opinion that the Tribunal has not considered the issue at all and there is total lack of application of mind. We would have normally referred the matter back to the Tribunal, but however, on the answer to the other questions of law raised, we are of the opinion that the matter should be considered by the AO itself. We answer the second question of law framed in the memorandum, against the Revenue and in favour of the asessee. The

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O.T.Rev.14/15

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question framed by us and extracted above is answered against the Revenue and in favour of the assessee.

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The O.T.Revision is disposed of as above. No

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costs.

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Sd/K.VINOD CHANDRAN JUDGE

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Sd/ASHOK MENON JUDGE

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M/S. Appolo Tyres Ltd. v. State of Kerala

Case brief

What is this about?

What did the court decide?

M/S. Appolo Tyres Ltd. v. State of Kerala

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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