2016 (6) TMI 947 - HC - VAT and Sales Tax

Court rules in favor of petitioner, overturns disallowance of Input Tax Credit exceeding entitlement.

The court found in favor of the petitioner, holding that the reversal of Input Tax Credit (ITC) exceeded entitlement was not justified. Relying on ... Input tax credit - TNVAT - non-filing of return by the selling dealer - challenge to the proceedings initiated by the AO where the Input Tax Credit (ITC) availed by the petitioner, has been reversed, on the ground that, it is in excess of what the petitioner is entitled to avail - Held that:- The ratio deducible from the decisions are that, ITC shall not be disallowed for the reasons that the seller had not been assessed, since the selling dealer has not filed returns. - Section 19 (1) states that input-tax credit can be claimed by a registered dealer, if he establishes that the tax due on such purchase has been paid by him in the manner prescribed and that was accepted at the time when the self-assessment was made. The pre-revision notices and the orders clearly stated that the petitioner-dealer had paid the tax to the selling dealer. If that be the case, it was held that the petitioner's case therein squarely fell under the proviso to Section 19 (1) of the Act. The liability had to be fastened on the selling dealer and not on the petitioner-dealer which had shown proof of payment of tax on purchases made. - Decided in favor of assessee. Issues:Challenge to the reversal of Input Tax Credit (ITC) availed by the petitioner based on exceeding entitlement.Analysis:The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, challenged the Assessing Officer's decision to reverse the ITC availed, claiming it exceeded the entitlement. The petitioner's explanation based on purchased bills was not accepted, leading to the reversal of ITC. The petitioner argued that the reversal based on website reports was illegal, citing precedents like Shanti Kiran India Pvt. Ltd. v. Commissioner Trade and Tax Dept. and other decisions. The court emphasized that ITC cannot be disallowed solely because the selling dealer has not been assessed, as seen in cases like Althaf Shoes (P) Ltd. v. Assistant Commissioner (CT), Chennai and Infiniti Wholesale Limited v. Assistant Commissioner (CT) Koyambedu. The court held that the Revenue cannot deny the claim of the assessee if the purchasing dealer has complied with the necessary requirements, even if the vendor has not been assessed. The court referred to Rule 10(2) of TN VAT Rules and Section 19(1) of the TN VAT Act to support its decision.Outcome:The court found that the impugned orders were not tenable based on the principles established in previous cases. Consequently, the Writ Petitions were allowed, and the impugned orders were quashed, with no costs awarded. The connected Miscellaneous Petitions were closed as a result of this judgment.