Court sets aside TNVAT Act assessment orders denying input tax credit due to cancelled dealer registrations.

The court set aside the revised assessment orders under the TNVAT Act for the assessment years 2007-08 to 2009-10, which denied input tax credit based on purchases from registration cancelled dealers. It held that benefits accrued based on valid documents during transactions cannot be denied due to retrospective cancellation of registration certificates. The court emphasized that purchasing dealers are entitled to rely on the registration certificates of selling dealers, regardless of subsequent cancellations. The judgment reaffirmed the principle that transactions conducted with valid registration certificates cannot be invalidated due to later cancellations, providing clarity on legal rights in such situations.

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Issues:
Challenge to revised assessment orders under TNVAT Act for the assessment years 2007-08 to 2009-10 based on purchases from registration cancelled dealers.

Analysis:
The petitioner, a registered dealer under the TNVAT Act and the CST Act, contested the revised assessment orders due to purchases from registration cancelled dealers. The key contention was the denial of input tax credit (ITC) based on the cancellation of registration certificates of the selling dealers with retrospective effect. The court referred to a similar case where the Supreme Court held that retrospective cancellation of a registration certificate does not affect those who acted upon it when valid. The court emphasized that benefits accrued based on valid documents during transactions cannot be denied, as it goes against the law established by the Supreme Court.

The court highlighted that the duty cannot be imposed on individuals dealing with registered dealers to verify the validity of registration certificates. It reiterated that a purchasing dealer is entitled to rely on the registration certificate of the selling dealer and act upon it, regardless of any subsequent cancellation. The court emphasized that reversing input tax credit based on retrospective cancellation of registration certificates is unjustifiable. Consequently, the court set aside the notices, revised assessment orders, and provisional assessment order that sought to deny the benefit of input tax credit due to the cancellation of registration certificates with retrospective effect.

In conclusion, the court allowed the writ petitions, quashed the impugned orders, and closed the connected miscellaneous petitions. The judgment reaffirmed the principle that transactions conducted when registration certificates were valid cannot be invalidated due to subsequent cancellations. The decision provided clarity on the entitlement of purchasing dealers to rely on valid registration certificates during transactions, emphasizing the importance of upholding legal rights in such scenarios.

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