VAT Dealer cannot Claim Refund/Avail ITC on Return of Purchased Goods after Limitation Period of 90 Days: Kerala HC [Read Order]

In a significant ruling, a division bench of the Kerala High Court has held that a dealer under the Kerala VAT Act is not entitled to claim any refund of tax paid on such purchase or avail benefit of ITC on paid on such purchase when the purchased goods are returned after period of limitation.

Justice S.V.Bhatti & Justice Basant Balaji was conspiring a plea by the dealer Mr. Narendra Kumar Gupta wherein the petitioner challenged an order of the VAT Tribunal. As per the Scheme, the return of goods within 90 days alone is taken note of and adjustments are made in the tax payable by the seller or the dealer. 

The petitioner contended that  the returns since are filed beyond 90 days, the seller may not be in a position to claim adjustment of tax already paid on the returned goods by him. The seller alone is disentitled from claiming the reversing of entry and the dealer being a purchaser should be allowed to claim the input credit on the said transaction.

The Tribunal observed that the statutory provision is that input tax credit can be availed against output tax due. When the goods purchased are returned to the seller, there is no output tax due as such sales return.

According to the Tribunal, the KVAT Act prescribed certain time limit for returning the goods to the seller. If the goods purchased are returned to the seller within a period of 90 days from the date of delivery of such goods, the selling dealer will get a deduction from the taxable turnover to the extent to which the goods were returned. The seller will refund the cost of goods sold and the tax collected from the purchaser. If the goods were returned after a period of 90 days the selling dealer will not get the benefit of turnover exemption from payment of tax.

Upholding the Tribunal order, the High Court dismissed the revision petition and held that “Now the issue before us is, the questions now formulated do not point out the illegality or irregularity in the finding recorded by the Tribunal. We are in agreement with the finding of disallowing the claim of the dealer, and secondly, no exception is pointed out warranting interference of this Court under Section 63 of the Act. By confirming the findings of the Tribunal, the revision is dismissed.”

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