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INPUT TAX DEDUCTION UNDER KARNATAKA VALUE ADDED TAX ACT 2003 – JUDICIAL CONUNDRUM | S. RAMASUBRAMANIAN, FCA & PRATEEK MARLECHA, ACA

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INPUT TAX DEDUCTION UNDER KARNATAKA VALUE ADDED TAX ACT 2003 – JUDICIAL CONUNDRUM

BY  S. RAMASUBRAMANIAN, FCA &  PRATEEK MARLECHA, ACA.

1.0       Introduction

1.1       Most of the States in India moved over to value added tax in 2005.  The legislative frame work for levying of VAT was introduced in 2003 and it was implemented from April 2005.  Some of the States initially did not come into VAT stream.  But later, all the States fell in line and introduced the VAT.  Under the value added taxation the tax is levied on value added at each stage. The main advantage of VAT system is that it avoids cascading effect of tax. Under sales tax system, tax on tax is levied which has a cascading effect. VAT system eliminates cascading.  Unlike the erstwhile sales tax, the value added tax was levied on each sale, but only on the value addition. The most practical method of taxing the value addition is by giving a set-off of the input tax paid against the output tax payable.  This system is known as “invoice credit system”.  Therefore, the input tax deduction forms the bed rock of VAT system.

1.2       Karnataka is one of the earliest States to have passed the necessary legislation in 2003 itself.  Karnataka Value Added Tax Act 2003(Act or KVAT Act for short) is the statute dealing with the levy of VAT in Karnataka.

2.0       Statutory Provisions:

2.1       S.10 of KVAT Act deals with output tax, input tax and the net tax payable.  S.10 as it stood before its amendment in 2005 is reproduced below:

10.  Output tax, input tax and net tax

(1)  Output tax in relation to any registered dealer means the tax payable under this Act in respect of any taxable sale of goods made by that dealer in the course of his business, and includes tax payable by a commission agent in respect of taxable sales of goods made on behalf os such dealer subject to issue of a prescribed declaration by such agent.

(2)  Subject to input tax restrictions specified in Sections 11, 12, 14,17 and 18, input tax in relation to any registered dealer means the tax collected or payable under this Act on the sale of him to any goods for use in the course of his business, and includes the tax on the sale of goods to his agent who purchases such goods on his behalf subject to the manner as may be prescribed to claim input tax in such cases.

(3)  Subject to input tax restrictions specified in Sections 11,12,14,17,18 and 19, the net tax payable by a registered dealer in respect of each tax period shall be the amount of output tax payable by him in that period less the input tax deductible by him as may be prescribed in that period and shall be accounted for in accordance with the provisions of this Act.

(4)  For the purpose of calculating the amount of net tax to be paid or refunded, no deduction of input tax shall be made unless a tax invoice, debit note or credit note, in relation to a sale, has been issued in accordance with Section 29 or Section 30 and is with the registered dealer taking the deduction at the time any return in respect of the sale is furnished, except such tax paid under sub-section (2) of Section 3.

(5)  Subject to input tax restrictions specified in Sections 11,12, 14,17,18 and 19, where under sub-section (3) the input tax deductible by a dealer exceeds the output tax payable by him, the excess amount shall be adjusted or refunded together with interest, as may be prescribed.

2.2       In 2015 S.10(3) was amended.  The amended section is reproduced below:

            (3)  Subject to input tax restriction specified in Sections 11,12,14,17,18 and 19, the net tax payable by a registered dealer in respect of each tax period shall be the amount of output tax payable by him in that period less the input tax deductible by him as may be prescribed in that period and relatable to goods purchased during the period immediately preceding five tax periods of such tax period, if input tax of such goods is not claimed in any of such five preceding tax periods and shall be accounted for in accordance with the provisions of this Act.

2.3       S.10(3) was amended against that retrospective effect from April 2015 by an amendment introduced in 2016.  This amendment is retrospective from 1st April 2015.  The amended S.10(3) is reproduced below:

(3)  Subject to input tax restriction specified in Sections 11,12,14,17,18 and 19, and net tax payable by a registered dealer in respect of each tax period shall be the amount of output tax payable by him in that period less the input tax deductible by him as my be prescribed in that period and shall be accounted for in accordance with the provisions of this Act..

Provided that, a registered dealer while calculating the net tax payable on or after first day of April 2015 may claim input tax relatable to goods purchased during the period immediately preceding five tax periods of such tax period, if input tax of such goods is not claimed in any of such five preceding tax periods.

3.0       Issues on Input Tax Deduction – Timing

3.1       Until 2010 or 2011, the KVAT officials did not take a view that the input tax deduction should be claimed within a specified time.  Sometime in 2011, the department seems to have formed an opinion that the input tax deduction should be claimed in the same month to which the purchase invoice relates.  For instance, if the purchase invoice is dated 25th of April 2012, the department was of the view that the input tax deduction should be claimed only in the return for the month of April 2012.  If by any chance, the deduction was not claimed, the only remedy available to the dealer was to file a revised return as provided in S.35(4) of KVAT Act.  U/s 35(4) of KVAT Act the revised return can be filed within six months form the end of the relevant tax period.  Obviously, the dealer will not be able to claim the input tax deduction if the time limit for filing the revised return had expired.

3.2       This view of the department was challenged in appeal and the Karnataka Appellate Tribunal held that S.10(3) does not prescribe any time limit for claiming the deduction and therefore, a dealer can claim the input tax deduction in any tax period and not necessarily in the same tax period to which the purchase invoice relates.  This matter was taken up in appeal before the Hon’ble Karnataka High Court.  The following are some of the judgments of the Karnataka High Court dealing with the issue of timing of the input tax deduction claim.

Sl No Title Citation Date of Order
1. State of Karnataka Vs K.Bond Polymers Pvt Ltd 2012 (73)KLJ 429 02.03.2012
2. Infinite Builders and Developers Vs ACCT 2013 (76) KLJ 390 30.05.2013
3. Suma Oil Agencies Vs Additional Commissioner of Commercial Taxes 2014 (72) VST 472 12.03.2014
4. State of Karnataka Vs Centum Industries Pvt Ltd 2014 (80) KLJ 65 30.09.2015
5. State of Karnataka Vs Manyata Promoters Pvt Ltd 2015(83) KLJ 375 30.09.2015
6. Sonal Apparel Pvt Ltd Vs State of Karnataka 2016 (85) KLJ 1 29.03.2016
7. Ajantha Digital Lab Vs Commercial Tax Officer (Audit 2.2) 2016(85) KLJ 653 31.05.2016
8. Bhoorathnom Construction Co.(P) Ltd Vs State of Karnataka 2016(96) VST 325 19.10.2016

3.3       As can be seen from the following discussions, contrary and conflicting  judgments have been rendered. In many decisions, the earlier judgments have not been noted or even if cited, have been distinguished on perfunctory grounds.

3.4       This article discusses the decisions, points out the contradiction and also critiques the judgments.

3.5       Let us first discuss the earliest decision of the Karnataka High Court in K.Bond’s case.In this case the dealer received a debit note for the extra tax paid by the seller sometime in the month of July 2006 though the original sales took place much earlier.  The dealer was not clear in his mind as to whether he is entitled to claim the input tax deduction if he   reimbursed to the seller the extra tax demanded in the debit note. The dealer sought a clarification from his LVO and on not hearing anything from the LVO, decided to claim the input tax deduction in the return filed for the month of December 2006 on the basis of legal advice.  It may be noted that the dealer did not file a revised return for the month of July 2006 claiming the extra input tax as per the debit note.  As a consequence of claiming the input tax deduction in the return filed for the month of December 2006, the dealer was entitled to a refund of Rs. 1,04,375/-. The VAT authorities rejected the claim of the dealer. This is ostensibly on the ground that the claim should have been made in the tax period of July 2006 and since no revised return has been filed for July 2006, the input tax deduction cannot be allowed.  When the matter reached the High Court, the High court observed as under :

Once the tax is paid under the Act, the assessee is entitled to the benefit of input tax.  Either he may retain the difference of the amount collected and appropriate it and if he has paid the money and he can put forth the claim for refund.  The delay in putting forth the claim for refund does not in any way effect his right to claim the said amount, which is legitimately due to him under Act nor it amounts to contravention and resulting in liability to pay the tax.  Interest and penalty as sought to be levied by the Assessing Authority.  The entire approach of the Assessing Authority and the First Appellate Authority is contrary to law and runs counter to the spirit of the Act.

The High court allowed the claim of the dealer.

3.6 Infinite Builders

The dealer therein was taking a consistent stand that he is not executing any works contract and all his contracts are for sale of completed immovable properties and therefore, he is not liable to pay KVAT. Finally, on merits the matter was held against the dealer.  During the assessment, the dealer claimed that he is entitled to input tax deduction.  The assessing officer disallowed the deduction. On appeal, JCCT(Appeals) allowed the claim. But the revisional authority held that the input tax deduction is not allowable on the ground that it was not claimed in the returns originally filed.  On appeal to High Court, the dealer argued that he could not have claimed the input tax deduction in the original return consistent with his stand that he is not liable to pay any output tax. (The dealer’s stand that input tax deduction could have been claimed only if output tax is liable to be paid on a taxable transaction and if the transaction is non-taxable, deduction cannot be claimed seems to be correct in view of a later decision of High Court in M.K . Agrotech (P) ltd vs State of Karnataka 80 KLJ 1. Please see observations at page 7 paragraph 9)  But the Hon’ble High Court rejected this argument and held that the input tax deduction is to be claimed in the tax period to which the purchase invoices relates.  With respect it is submitted that the Hon’ble High Court proceeded on the assumption that there is a time limit inbuilt in S.10(3) of KVAT Act and that time limit is the tax period to which the purchase invoice relates. The High Court rested its case on the fact that no revised return was filed and in the original return no claim for input tax deduction was made.  As stated earlier, it was also held that there is an inbuilt time limit prescribed in S.10(3) of the Act.  But there is no analysis of S.103) to arrive at the above conclusion. The decision in K.Bond was cited before the Hon’ble Tribunal but the court did not deal with the submissions.  Though it noted the submission of the dealer that it is entitled to claim input tax deduction on the basis of the decision of K.Bond, there is no discussion by the court on this submission.

3.7       In Sumo Oil Agencies the High court without any analysis of S.10(3) simply held that unless the dealer claims the input tax deduction in the monthly return (VAT 100), deduction is not allowable.  There is no discussion at all on S.10(3).

3.8       Decision which really stirred the hornet nest was Centum Industries’ case.  In this case the dealer claimed the input tax deduction in the month of February 2007 though the purchases were not pertaining to the tax period of February 2007.  The authorities rejected the claim of the dealer.  The Tribunal allowed the claim.  When the matter was taken up by the department to High court, the High Court reversed the judgment of the Tribunal and held that the dealer is entitled to input tax deduction only if the deduction is claimed in the tax period in which the tax is paid.  In paragraph 12 at page 71 of 80 KLJ, the High court rejected the contention of the dealer that once input tax has been paid, by the virtue of S.10 the assessee is entitled to rebate of tax against the output tax notwithstanding the fact that such a claim is not put forth in the returns filed within the aforesaid period.  The court held that if the said interpretation that has to be accepted it would render the period prescribed under the Act meaningless.  The court was referring to the period prescribed u/s 35(4) for filing the revised return.  The court also rejected the contention of the dealer that S.10(3) does not prescribe the time limit.  Again, with respect it is submitted that the court rejected this argument without a proper and detailed analysis of S.10(3).  The court held that words “in that period” specifies the period during which the input tax is paid and the output tax is payable and the same has to be accounted in accordance with the provisions of the Act.  It is submitted that the expression “in that period” in S.10(3) as far as input tax is concerned does not in any way refer to any particular period in which the input tax is to be claimed.  While there can be no doubt the output tax is payable in the tax period in which the sale takes place as provided in S.10(1) of the Act, there is nothing in S.10(2) or S.10(3) which prescribes in which tax period the input tax deduction is to be claimed.  S.10(2) defines the input tax to mean the tax collected or payable under the Act on the sale to him of any goods for use in the course of business and it goes on to say that input tax deduction is to be claimed subject to restriction in S.11, 12 etc.  There is nothing in Sub-section 10(2) prescribing the period in which the  deduction is to be claimed.  Similarly, S.10(3) also does not specifically state that the input tax should be claimed in a particular tax period.  A more detailed analysis of S.10(3) will follow later.

In Centums’ case the Hon’ble High Court held that the decision in K.Bond is not applicable to the facts of the Centum.  It was held that in K.Bond the issue was with reference to the refund arising out of debit/credit notes.  It is submitted with respect that the above distinction by the Hon’ble High Court is not tenable in law.  The court failed to recognize that the refund is a consequence of the input tax deduction. Unless the deduction is allowed, the question of refund does not arise at all.  Therefore, the distinction made by the court is not correct in law and it is a distinction without a difference.

3.9       When there seemed to be a judicial consensus that the input tax deduction is to be claimed in the same tax period to which the purchase invoice relates, the High Court rendered its judgment in Manyata.  The issue in Manyata is with reference to S.20(2) of KVAT Act.  U/s 20(2) of KVAT Act, a SEZ unit or a developer is entitled to refund of tax paid on purchase of inputs.  In this case, the dealer claimed the refund of the purchase tax paid by him in a month other than the month of purchase..  This was rejected by the authorities.  When the matter reached the High Court, the High court approved the finding of the Tribunal that S.10(3) is not applicable to a refund claim made u/s 20(2) of the Act.  It was also held that S.20(2) r.w.r. 130A form a separate code by itself and the refund is to be governed by only these two provisions and not by S.10(3).  But the Hon’ble High Court did not stop at that.  It was held that nowhere in the Act it has been stated that input tax credit should be claimed in the month in which the date of invoice of the Supplier/Vendor falls or the purchasing dealer has to claim input tax credit in the same period in which the bills have been raised by the selling dealers.  The above observations are with reference to the input tax deduction u/s 10(3).  It appears that the above observations are mere obiter dicta.  As stated earlier, having held that S.20(2) and Rule 130A form a separate code, there was no need for the Hon’ble court to discuss S.10. Though the High Court referred to K.Bond, it did not refer to other decisions holding otherwise..

3.10     On a writ petition filed by various dealers in Sonal Apparels’ case, the Hon’ble single judge held that it is not necessary to claim the deduction in the same tax period to which the purchase invoice relates.  It followed obiter dicta in Manyatas’ case and distinguished Centum Industries’ case.  Centum Industries was distinguished on following terms.

 

In Centum Industries Private Limited’s case, this Court has interpreted Section 10(3) to mean that a dealer is required to avail credit of input tax in the month in which the ‘input tax’ is paid by the purchasing dealer.  The said decision does not however, support the proposition that input tax must be availed of in the month in which the selling dealer raises his invoices.  The Revenue is hence not justified in seeking to apply the said decision in support of its reasoning.

With respect it is submitted that the distinction made by the Hon’ble single judge does not appear to be reasonable.  The factual position in Centum’s case as noted earlier is that the debit note was raised in the month of July 2006.  The court held that the input tax deduction cannot be claimed in the month of December 2006 and ought to have been claimed only in July 2006. This will apply with equal force even to the claiming of input tax deduction on the basis of purchase invoices.

3.11     Now the facts of Ajantha Digital Lab can be noticed.  In this case the dealer was claiming that he is not liable to pay VAT on processing and supply of photographs, prints and negatives.  This was based on certain judicial pronouncements of Karnataka High Court.  Later, the Supreme Court reversed these judgments and held that such processing would amount to works contract and hence, a deemed sale.  While assessing the dealer after the Supreme Court judgement, the tax authorities did not allow the input tax deduction on the ground that it was not claimed in the return.  The High Court held that input tax credit was not claimed in the original returns because the assessee had taken a stand that it is not liable to pay tax and therefore, it cannot be non-suited to make such claim at the time of reassessment after Supreme Court judgment.  It may be noted here that the decisions in Infinite Builders and Sumo Oil where the High Court had held that claiming the input tax deduction in the return is necessary, have not been noted in the judgment.

3.12     In Bhoorathnom Construction Companies’ case the High Court held again that unless a dealer claims the input tax deduction in the return, the deduction cannot be claimed.  It followed the decision of the Centum Industries.  The decision in Manyata and Sonal Apparels were not considered.

3.13     An analysis of the above decision would show that there is an apparent contradiction in the judgment of the High Court.  In the opinion of the authors a valid criticism can be levelled against the judgments on the ground that a full and deeper analysis of S.10(3) of KVAT Act has not been made to arrive at the final conclusion.  It appears that following is the proposition of law laid down by the High Court.

  1. a) The input tax deduction should be claimed in the return filed by a dealer. If for any reason the dealer did not claim the input tax deduction in the return, he is not entitled to the same.
  2. b) The deduction should be claimed in the month in the tax period to which the purchase invoice relates.
  3. c) This may not apply to a case of a refund and the refund can be claimed at any time.

3.14     Now let us analyze S.10(3) independently without referring to any judicial precedence.  S.10(3) before its amendment in 2015 is in two parts. S.10(3) deals with the computation of net tax payable for a tax period.  The section envisages following steps

  1. a) The net tax payable for each tax period should be calculated as provided in the section.
  2. b) The output tax payable for that period is to be determined.
  3. c) Input tax deductible as may be prescribed for that period should be deducted.
  4. d) The balance is the net tax payable or refundable.

It may be noted the expression used with respect to output tax and input tax is “that period” The use of ”that” in “that period” suggests that it refers to a period mentioned earlier. In the first portion of S.10(3) the period referred to is the net tax payaable for a tax period. Therefore, the period with reference to output tax and input tax deduction is that tax period for which the net tax is to be computed. There can be no difficulty in understanding that the output tax always relates to a particular tax period; i.e, the tax period in which the sale takes place.  The output tax automatically relates to the sale and the tax is payable in that tax period in which the sale takes place.  But when it comes to input tax deduction the exact phrase used is “less input tax deductible by him as may be prescribed in that period”.  There is nothing in S.10(3) which initially states that the input tax shall be deducted in a particular tax period. The court has not given proper emphasis to the expression “as may be prescribed in”.  It is humbly submitted that the expression “as may be prescribed” governs not only the input tax deductible but also “in that period”.  Therefore, unless the rules clearly prescribe the tax period during which the input tax is to be claimed, S.10(3) cannot be interpreted to say that the input tax deduction should be claimed in that tax period to which the purchase invoice relates.  It is not the case of the department that there are any rules to this effect in the KVAT Rules.  Even Rule 38 only states that the net tax relating to all place of business should be paid before filing the return and the return should be accompanied by proof of payment. In the absence of any particular rule prescribing any condition as to when the input tax deduction should be claimed, by a process of interpretation of S.10(3) such conditions cannot be imposed. Even assuming that the expression “as may be prescribed” governs only the input tax deductible and not “that period” the question that needs to be answered is whether there is any statutory prescription that input tax deduction can be claimed only in a particular period. The answer is an emphatic no.  How can a time limit can be assumed in the absence of specific provisions? Central Excise Rules dealing with Modvat\Cenvat credit provide for specific time limit within which the credit should be availed.   In those decisions where the court has rejected the claim of the dealer that S.10(3) does not prescribe any time limit for claiming input tax deduction, it has failed to notice that there is no specific provision specifying the time limit.  It is submitted with respect that court has also failed to notice the fundamental principles on which the VAT system is based.  The fundamental principle is that the tax is to be levied on value addition and the input tax deduction is bed rock of the VAT system.  The Hon’ble Supreme Court, in Collector of Central Excise. Dai Ichi Karkaria Ltd 1999 (112) ELT 353 held that the modvat credit is indefeasible.  The ratio of the above decision would apply to input tax deduction also.  It is submitted that the input tax deduction is not a concession given by the legislature as a matter of gratis.  It is an integral part of VAT system and unless the input tax deduction is allowed, the VAT system cannot work.  No doubt the legislature can prescribe the conditions for allowing the input tax deduction.  But that does not mean that the input tax deduction is a benefit or gratis given by the legislature. The strict principles of interpretation regarding exemptions provisions cannot be applied.  It is submitted that the provisions of input tax deduction should be interpreted keeping in mind the fundamental principles of VAT system.  But the Hon. Supreme Court has held otherwise. In Jayam & co vs ACCT, 96 VST 1 it was held that there is no inherent or vested right in dealers to claim the benefit of input tax deduction. The above judgment was given in the context of challenge to constitutional validity of sections prescribing conditions. It is submitted that the Supreme Court decision should be understood in the context in which it was rendered. It is submitted with respect that it is not correct to say that input tax deduction is a concession ignoring the fundamentals of VAT scheme. Principle laid down in Dai Ichi Karkaria continues to hold the field.   Rajasthan High Court in Panwar Trading Corporation vs State of Rajasthan held that input tax deduction is a concession. Therefore our view that input tax deduction cannot be treated as a concession may not be acceptable in view of the above two judgments.

The expression ‘deductible by him’ has to be read in conjunction with section 10(4) of KVAT Act.  Section 10(4) permits a deduction of input tax provided the prescribed tax invoice or debit note or credit note is with the registered dealer at the time of claiming the input tax deduction. Reading subsections 3 and 4 of section 10 together, it is submitted that input tax deduction can be claimed in any month if conditions specified in subsection 4 of section 10 are satisfied. It is also submitted that the expression ‘input tax deductible by him’ as may be prescribed in that period refers to the quantum of deduction and not to the eligibility of deduction.  For instance, by applying the partial rebating formula and special rebating formula, the quantum may get reduced.  Therefore, the expression ‘deductible’ refers to the quantum of input tax deduction and not to the entitlement.

Therefore, until the amendment of S.10(3) w.e.f. 1.4.2015 there was no requirement that     the input tax deduction should be claimed only in that tax period to which the purchase invoice or other documents relate.

3.15     The Centum Industries’ case is now pending in appeal before the Hon’ble Supreme Court and one hopes that the counsel will make detailed submissions and the Hon’ble Supreme Court will arrive at a fair interpretation of S.10(3) after taking into account all aspect of the matter.

3.16     One issue which needs to be discussed is whether there is a requirement that the input tax deduction should be claimed in the return and one cannot make a claim during the assessment if the deduction has not been claimed in the return.  As stated earlier, there is nothing specific in KVAT Act which requires that the input tax deduction should be claimed in the return.  Wherever the legislature wanted a deduction to be allowed only if it is claimed in the return, it has specifically provided so.  For instance, S.80A(5) of Income Tax 1961 states that deductions u/s 10A, 10AA or certain sections of VI A of Income Tax Act will not be allowed unless a return is filed claiming such deduction. S.80AC states that the some deductions under Chapter VIA  of Income Tax Act shall  be allowed only if the deduction is claimed in the return filed within the time allowed u/s 139(1) of Income Tax Act.  Therefore, can it be said that in the absence of any similar provisions in KVAT Act, the deduction can be allowed even if the input tax deduction is not claimed in the return and the dealer makes a claim during the assessment or reassessment proceedings.  It is a well settled principle that the proper determination of the taxable turnover and the tax payable is the fundamental duty of all stakeholders like dealers, assessing authority and the appellate authority.  Just because a dealer did not claim a deduction which he is entitled to in the return, he should not be denied that deduction if he claims it during the assessment/reassessment.  No doubt the Hon’ble Supreme Court in Goetze (India) Ltd Vs CIT 284 ITR 323 held that an assessee cannot file an additional claim before the assessing officer without filing a revised return.  Though one may justifiably and with respect argue that Goetze India is not correctly decided, being a decision of the Supreme Court it is binding on all persons in India.  So let us assume for the moment that the dealer cannot claim the deduction during the assessment/reassessment if he had not claimed it in the return.  But in the very same judgment the Hon’ble Supreme Court held that the above position will not apply to the additional claims made during appeal proceedings. It was held that an assessee is entitled to make any fresh claim before the appellate authorities.  Therefore, a dealer can claim that he is entitled to input tax deduction even though he has not claimed it in the return as an additional ground before the appellate authorities.  The appellate authorities are bound to examine the claim and take a decision on merits and they cannot reject the additional ground by stating that the claim was not made in the return.  The Hon’ble Supreme Court in National Thermal Power Corporation in (229) ITR 383 held that an assessee is entitled to raise additional grounds in appeal not raised before the assessing authorities. Similarly in Jute Corporation of India Ltd Vs CIT (187) ITR 688 it was held that an additional ground can be raised before appellate authorities. It is submitted that if the appellate authorities refused to allow the input tax deduction on the ground that it has not been claimed in the return, the filing of the additional grounds before the appellate authorities would be meaningless and a mere mirage.  Therefore, we are of the opinion that at least in the appeal proceedings the dealers can agitate the allowability of input tax deduction even though they have not claimed in the return.  It may also be noted here that there is no estoppel against law.  The Hon’ble Karnataka High Court in Bhandari Metals and Alloys (Private) Ltd Vs State of Karnataka, 2004(56) KLJ 438  held that a dealer can raise a ground against non-taxability in an appeal even though he had admitted the liability in his tax returns.  The High Court held that there is no estoppel against law. If a dealer can claim in appeal that he is not liable which he himself has admitted to be liable in his return, we do not see any reason as to why he cannot make a fresh claim by way of additional ground. Hence, a dealer can claim the input tax deduction in an appeal proceeding even though he has not claimed it in the return.

4           Conclusion:-

After amendment to S.10(3) with effect from 1-4-15, there is clarity in law as to the timing of input tax deduction. For the earlier period, the confusion continues. Let us hope that Supreme Court will give a well-reasoned judgment and settle the controversy.