2015 (2) TMI 1393 - HC - VAT and Sales Tax

Tax authority violated natural justice by denying hearing time before reversing input tax credit claims under section 19

The Madras HC held that the tax authority violated principles of natural justice by passing assessment orders on 30.12.2014 without granting or rejecting ... Violation of principles of natural justice - though 20 days time was sought by the petitioner on 19.12.2014, when the notices were received for the respective assessment years with proposal to reverse the claim of ITC on the ground that the selling dealer has not filed monthly returns and payment of tax to the respective assessing officer, without granting or rejecting the request, the respondent has passed orders on 30.12.2014. HELD THAT:- The petitioner has relied on the decision of this Court in the case of ALTHAF SHOES (P) LTD. VERSUS ASSISTANT COMMISSIONER (CT) , VALLUVARKOTTAM ASSESSMENT CIRCLE, CHENNAI-6 [2011 (10) TMI 567 - MADRAS HIGH COURT], wherein this Court has held The mere fact that the Department had not made an assessment on the dealer's vendor, per se, could not stand in the way of the assessing officer considering the claim of the dealer under section 19 of the Act. Going by section 17 which provided that the burden on the purchasing dealer rested to the extent of showing that he was not liable to tax under the Act and read in the context of the fact that the petitioner-dealer had given his sellers' TIN number and had also produced the invoices evidencing the purchase of materials paying tax, the Department could not successfully canvass its claim that the petitioner was not entitled to have the refund. The matters are remitted back to the authority concerned for passing appropriate orders afresh on merits and in accordance with law after affording an opportunity of being heard to the petitioner - Petition disposed off. Issues:Challenging orders of respondent dated 30.12.2014 and seeking direction to pass orders afresh based on legal principles. Violation of principles of natural justice by respondent.Analysis:The petitioner filed writ petitions challenging the respondent's orders dated 30.12.2014, requesting fresh orders in line with legal principles established by the court in a previous judgment. The petitioner contended that despite seeking 20 days to respond to notices proposing to reverse the claim of Input Tax Credit (ITC) due to the selling dealer's non-compliance, the respondent issued orders on 30.12.2014, allegedly breaching natural justice principles.The learned counsel for the petitioner referenced a previous judgment (2012) 50 VST 179 (Mds) regarding the assessing officer's duty to consider a dealer's claim under section 19 of the Act, emphasizing that the burden is on the purchasing dealer to demonstrate tax liability. The court in the cited case highlighted that if a purchasing dealer has complied with prescribed requirements, the claim cannot be denied solely based on the vendor's tax remittance status.In another case (2013) 60 VST 283 (Mad), the court reiterated the importance of the selling dealer's tax payment status, emphasizing that liability rests with the selling dealer, not the purchasing dealer who has fulfilled tax payment obligations. The court emphasized that the assessing authority lacks the power to revoke ITC based on the selling dealer's tax status, as long as the purchasing dealer has followed prescribed rules.Considering the legal precedents and arguments presented, the court found the respondent's orders unsustainable and set them aside. The matters were remitted back to the authority for reconsideration, directing the petitioner to appear, produce documents, and affording an opportunity to be heard. The court instructed the respondent to pass appropriate orders within four weeks, emphasizing that failure by the petitioner to avail the opportunity would not influence the authority's decision.In conclusion, the writ petitions were disposed of with the direction for fresh consideration by the authority, ensuring compliance with legal principles and principles of natural justice.