Input tax credit under the KVAT Act is a concession, not a right, and the legislature can impose restrictions on its availability, affirming the validity of Section 11(5)(c).

JUDGMENT

Petitioner- a private limited company dealing with Gold and Diamond jewellery and other articles of precious stones, is a registered dealer under the Kerala Value Added Tax Act (for short ‘the KVAT Act’) on the rolls of the fourth respondent- the Assistant Commissioner (Assessment), Commercial Taxes, Special Circle-I, Kochi. For the assessment year 2009-10, the petitioner purchased jewellery from the registered dealer within Kerala, who had obtained it under the scheme of compounding under Section 8 (f) of the KVAT Act. The tax was collected from the petitioner and the petitioner filed monthly returns and annual returns conceding its total and taxable turnover and claimed credit on input tax in its purchases. Thereafter, the assessing authority issued Ext.P3 notice and then completed the assessment vide Ext.P5 order disallowing the input tax credit. The petitioner has approached this Court challenging Ext.P5 order and also challenging the constitutional validity of Section 11 (5)(c) of the KVAT Act.

2. The first respondent filed a counter affidavit contending as follows:-

The assessee has purchased jewellery from three different dealers and availed input tax credit. It was further stated that the said dealers had paid tax at a compound rate in the year 2010 and hence the petitioner is not eligible for availing of input tax credit for those purchases. Section 11 (5)(c) of the KVAT Act stipulates that no input tax shall be allowed for the purchases from a dealer paying compound tax under Section 8 (f) of the Act and hence the input tax credit to the tune of Rs.12,90,940/- was disallowed to the petitioner. It is contended that like any other fiscal statute, the grant of input tax is a concession or relaxation and nobody is expected to claim it as a matter of vested right. The denial of the benefit of availing input tax credit to the purchases from dealers who opt for compounding facility cannot be put to challenge as it is within the power of the legislature to make such provisions and restrict the benefit of concession or relaxation either to a class of persons and even in the case of extending such benefits to all, restricting the term or period or fix a time limit for concession that can be availed to. The calculation of tax amount for compounded dealers and non-compounded dealers is entirely different. When the dealers opting for compounding facilities remit tax based on certain slabs or scales,the regular taxpayers paid tax based on actual turnover. The input tax credit being a concession granted by the statute is only to be received as per the scheme of the statute. The conditions prescribed in (5)(c) are absolutely necessary for the smooth implementation of the Act and any deviations from the conditions and procedures prescribed would lead to disruption of the mechanism of the statute. It is further contended that it is not only the dealers in gold who make purchases from the persons availing the benefit of compounding of tax, but other dealers who deal with works contract, metal crusher unit, cooked food, video lending etc. are also denied the facility of availing of input tax credit. Hence, the people, who make purchases from dealers availing compound facilities, make a class by themselves and there is no illegal discrimination among such people. No question regarding the violation of Article 265 of the Constitution of India arises since the provisions have been introduced through specific provisions of law which relate its root to Entry 54 of the State list in Schedule VII.

3. Heard the learned counsel for the petitioner and the learned Senior Government Pleader.

4. Learned counsel for the petitioner submits that section 8(f) is not a compounding provision which merely provides for an easy system of payment of tax by the dealer under the compounding and it specifically enables the dealer to collect the tax and thus, as per the said proviso, the tax collected in excess is to be paid over to the Government. It was