2020 (6) TMI 683 - HC - VAT and Sales Tax

Court sets aside order on input tax refund for exempted sales, directs fresh decision; emphasizes verification & TNVAT Act restrictions.

The court allowed the writ petition, setting aside the order regarding refund of input tax for exempted sales and directing a fresh decision by the second ... Refund of input tax credit - section 18 subject to restrictions in section 19 - assessing authority's fact finding to ascertain visible and invisible loss - uniform percentage for invisible loss not permissible - reopening of refund/order and revision after notice - show cause notice and opportunity of personal hearing before revisionRefund of input tax credit - section 18 subject to restrictions in section 19 - uniform percentage for invisible loss not permissible - Validity of the impugned order reversing/deducting input tax credit and the practice of adopting uniform percentages for invisible loss. - HELD THAT: - The Court followed the ratio in Interfit Techno Products Ltd. which held that entitlement to refund under Section 18(2) is not automatic and must be examined subject to the restrictions and conditions contained in Section 19. An assessing authority must undertake a fact-finding exercise to ascertain the quantum of loss (visible and invisible) in relation to goods purchased and used in manufacture, and to determine whether any restriction under Section 19 applies. Consequently, assessing authorities are not justified in adopting a uniform percentage as invisible loss and mechanically calling upon dealers to reverse input tax credit on that basis. Applying that principle to the facts, the Court set aside the impugned order of the second respondent which had applied deductions/reversals without the required individualized fact-finding and justification. [Paras 3]Impugned order reversing/deducting input tax credit is set aside to the extent it proceeded without required fact-finding and by applying uniform percentage deductions.Reopening of refund/order and revision after notice - show cause notice and opportunity of personal hearing before revision - assessing authority's fact finding to ascertain visible and invisible loss - Procedure to be followed on remand for reconsideration of the refund order relating to assessment year 2011-12. - HELD THAT: - The Court remanded the matter to the second respondent for fresh decision on merits in accordance with law. The second respondent is directed to issue a show cause notice to the petitioner clearly setting out the circumstances under which revision or reversal of the refund is proposed, and to afford the petitioner an opportunity to file objections with supporting documents and to be heard personally. Timelines were prescribed for issuance of the notice, submission of objections, and disposal of the matter: the notice to be issued within four weeks of receipt of the order, objections to be filed within two weeks thereafter, and a fresh order to be passed on merits after personal hearing within four weeks of receipt of objections. [Paras 5]Matter remitted for fresh consideration; second respondent to issue show cause notice and decide afresh after hearing the petitioner in accordance with law within the stipulated timelines.Final Conclusion: Writ petition allowed to the extent that the impugned order dated 25.10.2013 is set aside and the matter relating to assessment year 2011-12 is remitted to the second respondent for fresh adjudication after issuing a show cause notice and affording the petitioner an opportunity of personal hearing, in accordance with the directions and timelines specified by the Court. Issues:Challenge to order dated 25.10.2013 regarding refund of input tax paid for exempted sales from 2007-2008 to 2011-2012.Analysis:The petitioner challenged an order regarding refund of input tax paid for exempted sales during specific years. The petitioner sought relief based on a previous court decision. The court referred to a previous judgment stating that the dealer claiming refund must satisfy the Assessing Authority that the claim is not restricted by any conditions under the VAT Act. The court emphasized that Assessing Authorities cannot apply a uniform percentage as invisible loss without proper verification. The court set aside all notices for reopening and orders reversing input tax credit, granting liberty to issue appropriate show cause notices and proceed lawfully. The court highlighted that Section 18 of the TNVAT Act is subject to restrictions and conditions under Section 19.The Additional Government Pleader for the respondents agreed with the petitioner's counsel's submission and had no serious objections to granting relief. The court, considering the facts and submissions, set aside the impugned order dated 25.10.2013. The court directed the second respondent to decide the issue afresh for the assessment year 2011-12 after issuing a show cause notice to the petitioner, allowing them to submit objections and required documents. The court instructed the second respondent to pass appropriate orders within a specified timeline after affording the petitioner a personal hearing.In conclusion, the writ petition was allowed, setting aside the impugned order and directing a fresh decision by the second respondent. The court specified timelines for issuing notices, submitting objections, and passing orders. No costs were awarded, and the connected miscellaneous petition was closed.