Penalty for false input tax credit needs a specific finding of fraud before confirmation under the VAT regime.

Penalty under Section 54(1)(19) of the Uttar Pradesh VAT Act could not be sustained without a specific finding that the input tax credit claim was false or fraudulent. The Tribunal had relied on general references to earlier orders and a limited factual basis, but it did not clearly record the statutory ingredients needed to confirm penalty. The matter therefore required verification of the earlier orders and a fresh finding on the relevant purchases. The penalty was not finally affirmed, and the issue was remitted for reconsideration on the required statutory basis.

---

---

Issues: (i) Whether penalty under Section 54(1)(19) of the Uttar Pradesh VAT Act could be sustained without a specific finding that the claim of input tax credit was false or fraudulent.

Analysis: The penalty had been initiated on the footing that the purchases were not verifiable and the input tax credit was therefore rejected. The Tribunal, however, did not record a clear and specific finding that the dealer had falsely or fraudulently claimed input tax credit. Instead, it referred generally to earlier appeal orders and recorded only a limited factual basis for sustaining the penalty. As the basis for confirming penalty under the provision required a specific finding on the statutory ingredients, the matter required verification of the earlier orders and a clear finding on the relevant purchases.

Conclusion: The issue was not finally decided on merits and was sent back for a specific finding under Section 54(1)(19) of the Uttar Pradesh VAT Act.

Final Conclusion: The penalty order was not affirmed finally and the matter was remitted to the Tribunal for fresh examination on the statutory basis required for confirming penalty.

Ratio Decidendi: Penalty under Section 54(1)(19) of the Uttar Pradesh VAT Act can be sustained only on a clear finding that the claim of input tax credit was false or fraudulent, and such finding must be specifically recorded before confirmation of penalty.

---