High Court upholds denial of Input Tax Credit based on false invoices, emphasizing verification

The Rajasthan High Court dismissed the revision petition challenging the Rajasthan Tax Board's decision to set aside tax, interest, and penalty. The court upheld the denial of Input Tax Credit claimed on false/forged VAT invoices, emphasizing the need for verification of tax payments by selling dealers. The respondent's exoneration from liability for the selling dealer's unpaid amount was questioned, highlighting potential double jeopardy for the State. The court reiterated previous rulings and found no substantial legal issue justifying reconsideration, leading to the dismissal of the petition.

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Issues:
1. Justification of Rajasthan Tax Board in setting aside tax, interest, and penalty.
2. Validity of Input Tax Credit claimed based on false/forged VAT invoices.
3. Responsibility of the respondent for the amount not deposited by the selling dealer.
4. Compliance with provisions of section 18(2) of the RVAT Act.
5. Deletion of penalty under section 61(2)(a) despite claiming Input Tax Credit on false/forged invoices.

Analysis:

1. The revision petition raised questions on the justification of the Rajasthan Tax Board in setting aside tax, interest, and penalty. The argument presented was that recovery could be made from the buyer if the registered seller obtained a forged registration and did not pay taxes. The contention was that not only tax but also interest and penalty should be levied in such cases.

2. The issue of claiming Input Tax Credit based on false/forged VAT invoices was discussed. It was highlighted that the petitioner's claim was found to be based on invoices from a dealer whose registration was canceled for non-payment of tax. The submission emphasized that Input Tax Credit should not have been allowed in such circumstances.

3. The responsibility of the respondent for the amount not deposited by the selling dealer was a crucial point. The Rajasthan Tax Board's decision to absolve the respondent from liability and allow Input Tax Credit, potentially leading to double jeopardy for the State, was questioned.

4. Compliance with the provisions of section 18(2) of the RVAT Act was a significant aspect of the judgment. The court referred to previous decisions and rulings to establish that certain conditions must be met for Input Tax Credit to be allowed, especially concerning the verification of tax payment by the selling dealer.

5. Lastly, the deletion of penalty under section 61(2)(a) despite the respondent's claim of Input Tax Credit on false/forged VAT invoices was examined. The court considered previous judgments and reiterated that the issue had already been settled in favor of the respondent in similar cases, concluding that no substantial question of law arose for consideration in the petition.

In conclusion, the Rajasthan High Court dismissed the revision petition at the admission stage, citing the precedent set by previous decisions and the absence of conflicting views from the Apex Court on the issues raised. The judgment emphasized the importance of verifying tax payments by selling dealers for the allowance of Input Tax Credit and highlighted the legal principles governing such cases.

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