Input tax credit reversal upheld where sister-concern transactions lacked proof of actual goods movement and indicated bill trading.

The Madras HC upheld reversal of input tax credit and the consequential penalty under the Tamil Nadu VAT Act, 2006, where transactions between sister concerns at the same premises were found to lack proof of actual movement of goods. Despite repeated opportunities, the assessee did not produce transport records or other evidence of delivery, and admitted that goods moved within the same campus without separate loading, unloading, or transportation charges. On that record, the authority was justified in drawing an adverse inference of bill trading and circulation of input tax credit, and the assessment was sustained.

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Issues: Whether the reversal of input tax credit and levy of penalty under the Tamil Nadu Value Added Tax Act, 2006, on the basis that the transactions between sister concerns at the same premises amounted to bill trading without actual movement of goods, was sustainable.

Analysis: The assessee was given repeated opportunities after remand, and the Revenue called for documents to verify the movement of goods and the genuineness of purchases and sales. The assessee did not produce transport records and stated that the goods moved between sister concerns located in the same campus, with no separate loading, unloading, or transportation charges. On the material produced, the Revenue inferred that the large volume of purchases from the sister concern, coupled with the absence of proof of movement of goods, indicated bill trading and circulation of input tax credit. The Court held that this conclusion was supported by the record and could not be termed unsupported by documents or made without basis.

Conclusion: The reversal of input tax credit, the consequential penalty, and the impugned assessment were held to be justified and sustainable.

Ratio Decidendi: Where an assessee, despite opportunity, fails to produce evidence of actual movement of goods and admits that the transactions are between sister concerns operating from the same premises, the authority may draw an adverse inference of bill trading and sustain reversal of input tax credit on the basis of the surrounding record.

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