Input tax credit limitation and natural justice: tax demand sustained, but penalty set aside for fresh consideration.
Input tax credit availed beyond the permissible period under Section 19(11) of the Tamil Nadu Value Added Tax Act, 2006 was held liable to recovery, and the tax demand was sustained on merits. The penalty imposed under Section 27(4) could not stand because the assessee's representation dated 29.08.2013 was not considered and the order was not passed in compliance with natural justice. The penalty portion was therefore quashed and remitted for fresh consideration through a speaking order, while the demand itself remained affirmed.
Issues: (i) whether the petitioner was entitled to resist recovery of input tax credit availed beyond the permissible period under Section 19(11) of the Tamil Nadu Value Added Tax Act, 2006; (ii) whether the penalty imposed under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 could stand in the absence of consideration of the petitioner's representation and proper compliance with natural justice.
Issue (i): whether the petitioner was entitled to resist recovery of input tax credit availed beyond the permissible period under Section 19(11) of the Tamil Nadu Value Added Tax Act, 2006.
Analysis: The availed credit was found to be beyond the period of limitation and, on merits, the challenge to the demand of input tax credit did not succeed. The confirmation of the tax demand was therefore upheld.
Conclusion: The issue was decided against the assessee and the recovery of tax/input tax credit was sustained.
Issue (ii): whether the penalty imposed under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 could stand in the absence of consideration of the petitioner's representation and proper compliance with natural justice.
Analysis: The representation dated 29.08.2013 was not considered while passing the order, and the penalty order was passed long after the notice and reply. In those circumstances, the penalty order was found to warrant interference and remand for a fresh speaking order.
Conclusion: The issue was decided in favour of the assessee and the penalty portion of the order was quashed and remitted for fresh consideration.
Final Conclusion: The tax demand was affirmed, but the penalty component was set aside and sent back for reconsideration through a speaking order, resulting in only a partial success for the assessee.
Ratio Decidendi: A demand may be sustained on merits, but a penalty order cannot stand where the relevant representation is not considered and the decision is not rendered in a manner consistent with natural justice.
TaxTMI 
AI Drafter ✕
TaxTMI 
