2014 (8) TMI 22 - HC - VAT and Sales Tax

Madras High Court Upholds Input Tax Credit Benefit Despite Retrospective Registration Cancellation

The Madras High Court ruled in favor of the petitioner, holding that denying input-tax credit due to the retrospective cancellation of registration ... Denial of input-tax credit due to retrospective cancellation of supplier's registration - reversal of input-tax credit - input-tax credit arising from transactions effected when supplier's registration was in force - benefits accrued on valid documents cannot be retrospectively deniedDenial of input-tax credit due to retrospective cancellation of supplier's registration - input-tax credit arising from transactions effected when supplier's registration was in force - Whether input-tax credit can be denied to the assessee solely on the ground that the selling dealer's registration certificate was cancelled with retrospective effect. - HELD THAT: - The Court followed the earlier decision of this Court in JINSASAN DISTRIBUTORS V. COMMERCIAL TAX OFFICER , holding that where registration certificates of selling dealers were in force at the time of the transactions and the assessee obtained benefits on the basis of valid documents and tax paid thereon, those transactions cannot be negatived merely because the supplier's registration was subsequently cancelled with retrospective effect. The determinative principle applied is that reversal of input-tax credit cannot be sustained when it would defeat benefits legitimately accrued to the assessee from transactions validly effected at the relevant time; denial of credit in such circumstances is contrary to the law as laid down by the Court. Applying that principle, the notices, revised assessment orders and provisional assessment insofar as they sought to deny input-tax credit only on the ground of retrospective cancellation were set aside. [Paras 15, 16]Notices and assessment orders denying input-tax credit solely on account of retrospective cancellation of the selling dealers' registration certificates were set aside and the writ petition allowed.Final Conclusion: Writ petition allowed; orders and notices insofar as they sought to deny input-tax credit only on the basis of retrospective cancellation of the selling dealers' registration certificates set aside; no costs. Issues:1. Denial of input-tax credit due to cancellation of registration certificates with retrospective effect.Analysis:The judgment delivered by the Madras High Court addressed the issue of denying input-tax credit based on the cancellation of registration certificates with retrospective effect. The petitioner relied on a previous case where a similar prayer was allowed by the court. The court emphasized that reversing input-tax credit due to retrospective cancellation of registration certificates is not justified. It was highlighted that benefits accrued to the petitioner based on valid documents during the sale and purchase of goods, where taxes were paid, cannot be denied. The court referred to the law laid down by the Supreme Court in a previous case to support its decision. Consequently, the court set aside the notices, revised assessment orders, and provisional assessment order that sought to deny input-tax credit based on the cancellation of registration certificates. The writ petitions were allowed, and no costs were imposed, leading to the closure of connected miscellaneous petitions. The Additional Government Pleader agreed that the matter was covered by the court's judgment, leading to the allowance of the writ petition on similar terms without any costs, resulting in the closure of the connected miscellaneous petition.