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of <h1>Dismissal of Petition Over VAT Re-Assessment Upheld for Lack of Natural Justice</h1> <h3>M/s. J.C. Industries Versus State of Karnataka</h3> M/s. J.C. Industries Versus State of Karnataka - [2018] 1 GSTL (VAT) 104 (Kar), 2018 50 G S.T.R. 32 Issues:Challenge to Re-Assessment Order under Karnataka Value Added Tax Act, 2003 based on breach of natural justice principles.Analysis:The petitioner challenged the Re-Assessment Order under the Karnataka Value Added Tax Act, 2003, alleging a breach of natural justice principles. The main contention was that adverse material regarding the disallowance of Input Tax Credit was not provided to the petitioner, specifically related to purchases from a dealer identified as a bogus entity. The Respondents contended that the selling dealer was non-existent and engaged in bill trading, leading to the disallowance of Input Tax Credit claimed by the petitioner. The Assessing Authority passed the impugned Re-Assessment Order based on these findings, raising a demand against the petitioner.The Proposition Notice dated 08.09.2016 clearly stated the disallowance of Input Tax Credit in relation to purchases from the alleged bogus dealer. The Respondent-authority concluded that the selling dealer was bogus and did not engage in actual sales to the petitioner, justifying the disallowance of Input Tax Credit. The Respondent-Assessing Authority, after thorough investigation, determined that the selling dealer only existed on paper, emphasizing that the Input Tax Credit claimed by the petitioner could not be allowed.The burden to prove the legitimacy of the selling dealer and the actual sales fell on the petitioner. The Court found that the Revenue Authorities adequately discharged their burden by investigating and establishing the non-existence of the selling dealer. It was emphasized that the State cannot grant Input Tax Credit without verifying the existence of the selling dealer and the actual sales. Allowing false Input Tax Credit would result in losses to public revenue, justifying the need for thorough verification processes by Revenue Authorities.Ultimately, the Court dismissed the writ petition, deeming it misconceived and highlighting that the petitioner was not entitled to curtail the investigation process through writ jurisdiction. The judgment emphasized the importance of verifying Input Tax Credit claims to prevent revenue losses and upheld the decision to dismiss the petition without costs.
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