2015 (4) TMI 1295 - HC - VAT and Sales Tax

High Court of Madras grants writ petition, directs respondent to honor input tax credit, stresses legal principles.

The High Court of Madras allowed the writ petition, set aside the impugned order passed by the Assistant Commissioner, and directed the respondent not to ... Reversal of input tax credit even before closure of the assessment year 2014-2015 - period from April, 2014 to October, 2014 - HELD THAT:- No doubt, it was the claim of the petitioner that at the time of purchase, they filed returns. Therefore, they claimed input tax credit. But even before the closure of assessment year 2014-2015, the assessing authority has passed the original assessment order and the notice was served on the petitioner only on 07.04.2015. In identical circumstances, this Court, while considering the almost similar issue, has come to the conclusion that the respondent cannot deny the benefit of input tax credit to the petitioner therein as it is contrary to the law laid down by the Apex Court in State of Maharashtra Vs. Suresh Trading Company [1996 (2) TMI 451 - SUPREME COURT]. Following the ratio laid down by the Apex Court, this Court is left with no other option except to direct the respondent not to deny the benefit of input tax credit to the petitioner as it is contrary to the law laid down by the Apex Court - petition allowed. Issues involved:1. Reversal of input tax credit before the closure of the assessment year.2. Validity of the impugned order passed by the Assistant Commissioner.3. Requirement of documents to verify input tax credit claim.4. Legal precedent regarding denial of input tax credit benefits.Analysis:1. Reversal of input tax credit before the closure of the assessment year: The petitioner challenged the impugned order passed by the Assistant Commissioner on the grounds that the reversal of input tax credit for the period from April 2014 to October 2014 was done prematurely. The Court noted that the assessing authority had passed the original assessment order before the closure of the assessment year, which was served on the petitioner only on 07.04.2015. Citing legal precedents, the Court held that denying input tax credit benefits before the closure of the assessment year contradicted established law, as laid down by the Apex Court and previous judgments of the High Court. Consequently, the Court set aside the impugned order.2. Validity of the impugned order passed by the Assistant Commissioner: The Court found that the impugned order reversing the input tax credit was not in accordance with the legal principles established by the Apex Court and previous decisions of the High Court. The Court emphasized that the respondent had no authority to reverse the input tax credit before the closure of the assessment year. By following the legal precedents, the Court directed the respondent not to deny the benefit of input tax credit to the petitioner, ultimately setting aside the impugned order.3. Requirement of documents to verify input tax credit claim: The respondent Department requested the petitioner, a registered dealer in Broadway assessment circle, to produce various documents to verify the genuineness of the input tax credit claim. These documents included purchase bills, purchase register, bank statements, cheque paid details, proof of movement of goods, stock register, day book, proof of mode of payment for goods movement, ITC adjustment register, and Form JJ/delivery note. The scrutiny of these documents was crucial in determining the legitimacy of the input tax credit claimed by the dealer.4. Legal precedent regarding denial of input tax credit benefits: The Court relied on legal precedents, including the judgment in State of Maharashtra Vs. Suresh Trading Company, to establish that denying input tax credit benefits to the petitioner before the closure of the assessment year was against established legal principles. By citing previous judgments of the High Court and the Apex Court, the Court reiterated that the respondent could not deny the benefit of input tax credit to the petitioner, leading to the setting aside of the impugned order. The decision was based on the consistent application of legal principles and precedents in similar cases.In conclusion, the High Court of Madras allowed the writ petition, set aside the impugned order, and directed the respondent not to deny the benefit of input tax credit to the petitioner. The judgment emphasized the importance of adhering to established legal principles and precedents in matters concerning input tax credit claims and assessments.