Reassessment and input tax credit rules upheld where escaped turnover and SEZ-linked sales justified denial of credit.

Reassessment under section 29(7) of the U.P. VAT Act was upheld because the Commissioner recorded reasons that turnover had escaped assessment. The court accepted that sales to units in a special economic zone justified examining entitlement to input tax credit, and held that section 13(1)(a) operates subject to the Act while section 13(7) denies credit in the specified export-linked situations. It further found that section 13(2) did not apply because there was no material showing the assessee was a developer, co-developer, or SEZ unit. Prior appellate finality did not bar reassessment where escaped assessment was otherwise made out.

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Issues: Whether permission for reassessment under section 29(7) of the U.P. Value Added Tax Act, 2008 could be sustained where the assessing authority had allegedly not considered the effect of sales to units in the special economic zone and the assessee claimed entitlement to input tax credit under section 13.

Analysis: Section 13(1)(a) grants input tax credit subject to the Act, while section 13(7) creates an exception in respect of goods sold in the course of export and denies credit in the situations covered by that provision. The impugned order recorded that the goods had been sold to units in the special economic zone and, on that basis, the authority formed the view that the assessee was not entitled to claim input tax credit on the relevant raw material. Section 29(7) authorises reassessment where turnover has escaped assessment, and the Court found that the Commissioner had recorded reasons in the impugned order. The Court also held that section 13(2) did not assist the petitioner, as there was no material to show that it was a developer, co-developer, or a unit established in the special economic zone. The fact that earlier appellate orders had attained finality did not bar exercise of jurisdiction under section 29(7) where escaped assessment was made out.

Conclusion: The reassessment permission was valid, the challenge to the impugned order failed, and the decision was in favour of the Revenue.

Ratio Decidendi: Where turnover has escaped assessment and the Commissioner records reasons showing a statutory basis for reassessment, prior appellate finality does not prevent exercise of jurisdiction under the reassessment provision, and input tax credit may be denied where the transaction falls within the statutory exception.

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