2011 (10) TMI 567 - HC - VAT and Sales Tax

Petitioner entitled to VAT credit refund despite discrepancies. Dealer's burden of proof emphasized.

Althaf Shoes (P) Ltd. Versus Assistant Commissioner (CT), Valluvarkottam Assessment Circle, Chennai-6

The court upheld the petitioner's entitlement to a refund of input tax credit under the Tamil Nadu Value Added Tax Act, 2006, based on compliance with ... Input tax credit - refund claim - genuinity of dealers - Held that: - so long as the purchasing dealer has complied with the requirements as given under rule 10(2), the claim of the purchasing dealer cannot, by any length of reasoning, be denied by the Revenue. The mere fact that the Revenue had not made an assessment on the assessee's vendor, per se, cannot stand in the way of the assessing officer considering the claim of the assessee under section 19 of the Tamil Nadu Value Added Tax Act. Going by section 17 of the Tamil Nadu Value Added Tax Act that the burden on the purchasing dealer rest to the extent of showing that he is not liable to tax under the Act and read in the context of the fact that the assessee had given his sellers' TIN number and had also produced the invoices evidencing the purchase of materials of payment of tax, I do not think that the Revenue can successfully canvass its claim that the assessee is not entitled to have the refund - petition allowed - decided in favor of petitioner. Issues:1. Claim for refund of input tax credit under the Tamil Nadu Value Added Tax Act, 2006.2. Discrepancies in the refund claim leading to withdrawal of relief and imposition of penalty.3. Interpretation of relevant provisions and rules regarding input tax credit claims.4. Compliance with documentation requirements by the purchasing dealer.5. Legal authority of circulars issued by the Commissioner.6. Assessment of refund claims and imposition of penalties by the assessing authority.Issue 1: Claim for refund of input tax credit under the Tamil Nadu Value Added Tax Act, 2006:The petitioner, a dealer and exporter of finished leather and shoe apparel, claimed a refund of input tax credit amounting to Rs. 11,59,936 for the month of August 2007 under section 18(2) of the Act. Initially allowed, the claim was later challenged due to discrepancies in the purchase figures. The respondent sought to withdraw the relief granted, alleging false claims of purchase from dealers. The petitioner provided necessary documentation, including VAT returns and TIN numbers of suppliers, to support the claim. Despite admitting discrepancies in certain claims, the petitioner contested the withdrawal of the refund. The court analyzed the burden of proof on the dealer to establish non-liability to tax and upheld the petitioner's entitlement to the refund based on compliance with documentation requirements.Issue 2: Discrepancies in the refund claim leading to withdrawal of relief and imposition of penalty:The respondent issued notices and eventually passed an order withdrawing the input tax credit refund, citing false claims of purchase. Along with demanding the refund amount, a penalty was also imposed. The petitioner contested the decision, arguing that non-remittance of tax by vendors should not affect their refund claim. The court emphasized that the burden of proof lies with the dealer to show non-liability to tax and that compliance with documentation requirements should suffice to support the claim.Issue 3: Interpretation of relevant provisions and rules regarding input tax credit claims:The court examined section 17 and section 19(19) of the Act, along with rule 10 of the Rules, to determine the validity of the input tax credit claim. It highlighted the dealer's obligation to provide specific details in support of the claim and concluded that as long as the purchasing dealer complies with the documentation requirements, the Revenue cannot deny the refund claim solely based on the vendors' non-compliance with tax remittance.Issue 4: Compliance with documentation requirements by the purchasing dealer:The court stressed the importance of the purchasing dealer fulfilling the documentation requirements specified under rule 10(2) of the Rules to substantiate the input tax credit claim. It noted that the petitioner had provided necessary invoices, TIN numbers, and other details, meeting the criteria set forth in the rule.Issue 5: Legal authority of circulars issued by the Commissioner:The court addressed the contention regarding the legal authority of circulars issued by the Commissioner, emphasizing that such instructions are valid as long as they do not contradict the provisions of the Act. It upheld the Commissioner's instruction regarding the verification of input tax credit claims by assessing officers.Issue 6: Assessment of refund claims and imposition of penalties by the assessing authority:The court reviewed the assessing authority's decision to withdraw the refund and impose penalties, emphasizing the need for proper consideration of documentation and compliance before rejecting refund claims. It set aside the orders and directed a reevaluation based on the evidence provided by the petitioner.This detailed analysis of the judgment covers the issues involved comprehensively, addressing the legal aspects and interpretations relevant to the case.