Input tax credit is contingent upon compliance with record-keeping and reporting requirements under the KVAT Act.

ORDER

A.K.Jayasankaran Nambiar. J.

The revision petitioner is engaged in running a bar attached hotel. While completing the assessment under the Kerala Value Added Tax Act ('KVAT Act' for short) for the assessment year 2006-2007, the turnover in respect of the sale of a used motor vehicle was not included in the returns submitted by the petitioner. The assessment under the KVAT Act accordingly came to be completed by an assessment order dated 30.03.2010, without including the said turnover. Subsequently, by Annexure A notice dated 22.6.2010 the petitioner was asked to show cause as to why escaped turnover attributable to the sale of the car that was purchased by him on 14.02.2006 should not be brought to tax at the rate of 4%. In response to the said notice the petitioner by Annexure B reply pointed out that what he had purchased was not an old car but a new car and therefore if the sale of the said car was to be subjected to tax under the KVAT Act, then he ought to be extended the benefit of input tax credit in respect of the tax paid by him at the time of purchase of the new car. The said stand of the petitioner was not accepted by the assessing officer who, by Annexure E order dated 16.7.2010, rejected the claim for input tax credit by referring to Section 11 (5) of the KVAT Act and holding that in as much as the purchase by the petitioner was was of a new car and not a used car, he was not entitled in terms of the said provision for availing input tax credit of the tax paid at the time of purchase of the new car. The said stand of the assessing authority was confirmed by the appellate authority in an appeal preferred by the petitioner. In a further appeal before the Tribunal, the Tribunal found that (5) of the KVAT Act had no application to the facts of the instant case since the said provision dealt only with the availment of input tax credit by a dealer who had purchased and resold a used car. Since in the instant case the petitioner had purchased a new car and thereafter sold the same during the assessment year, the provisions of (5) of the KVAT Act did not apply. The Tribunal went on to hold that in respect of the new car purchased by the petitioner, he could not be permitted to avail input tax credit of the tax paid at the time of purchase of the said car since he had not included the turnover in respect of the sale of the said car in the returns filed by him before the authorities. The Tribunal relied on the decisions of this Court inVenus Marketing v. State of Kerala [(2011) 19 KTR 575 (Ker] and State of Kerala v. Rajalakshmi V.M. /b>. [(2014) 22 KTR 342 (Ker] to hold so. The tribunal was of the view that the department should be slow to grant concessions and benefits like input tax credit to dealers who are involved in tax evasion and benefits ought to be given strictly in accordance with the provisions of the KVAT Act and Rules. The appeal preferred by the petitioner was therefore dismissed by the Tribunal.

2. Before us, the learned counsel appearing for the petitioner would raise the following questions of law for our consideration:-

“1.Whether the petitioner is entitled to claim input tax credit of the sale of the motor vehicle under Section 11 of the KVAT Act for the turnover assessed by the assessing authority under Section 25 of the KVAT Act?

2. When the dictum laid down by this Hon'ble Court in Venus Marketing v. State of Kerala reported in (2011) 19 KTR 595 apply to the facts of the present case.”

2. It is the submission of the learned counsel that the purchase of the new car and its subsequent resale was reflected in the books of accounts of the petitioner firm and hence the Tribunal ought not to have denied the benefit of input tax credit which was otherwise available to the petitioner merely for the reason that the turnover in respect of the sale of the motorcar had not been included in the return filed for the assessment year in question. It is also his submission that while the initial proposal of the