2024 (12) TMI 218 - HC - VAT / Sales Tax

Court Orders IP Check for Tax Credit Fraud; Forensic Review to Guide New Tax Decision.

Sukumar Traders Rep by its Proprietor Mr. K. Nagaraju Versus The Commercial Tax Officer, The Superintendent of Police, Tiruvallur

The court disposed of the writ petition by instructing the respondents to verify the IP address used for transactions during the disputed period to ... Challenge to assessment order - wrongful availing of input tax credit - HELD THAT:- A reading of the two counter affidavits and also letter of the petitioner which has been enclosed at Page No.27 seems to indicate that the said letter was sent on 25.12.2014 which accompany an acknowledgement in the Letter Delivery Book which is also dated 25.12.2014. It is highly implausible for the petitioner to have undelivered such a letter on 25.12.2014 as the said date is a holiday it being Christmas day and also highly unlikely an acknowledgement also would not have been given on 25.12.2014 being a holiday. Therefore, prima facie there are indications that there is no truth in the submissions of the petitioner that on 25.12.2014, a letter would have been issued by the petitioner and acknowledged by the respondent in the petitioner's Letter Delivery Book on the same day. Therefore, the challenge to the impugned order on the ground that the petitioner had surrendered the registration under TNVAT Act, 2006 and CST Act, 1956 cannot be accepted. In any event, whether indeed transaction was carried out by the petitioner during the period in dispute in the year 2016-2017 or not is to be verified from the electronic file and IP address which the Department will have in its possession. This Writ Petition is disposed of by directing the respondents to verify as it from which IP address the transactions were made by for filing returns in the name of the petitioner, during the period in dispute which has facilitated wrongful availing of the input tax credit and passing thereof to unscrupulous dealers. Issues:Challenge to assessment order under TNVAT Act, 2006 for demand and penalty.Alleged surrender of VAT registration and misuse of login ID.Investigation into complaint and status report.Verification of transactions and IP address for input tax credit.Direction for forensic examination of records and assistance of Cyber Crime Cell.Analysis:The petitioner challenged an assessment order dated 26.11.2021, confirming a demand of Rs. 18,16,522/- with a penalty of Rs. 9,08,261/- under Section 27(4)(1) of the TNVAT Act, 2006. The petitioner claimed to have surrendered the VAT registration on 25.12.2014 due to the business closure and alleged misuse of their login ID by someone else post-cancellation. The petitioner requested an investigation into the misuse of their ID for transactions leading to the wrongful availing of input tax credit. The court directed the second respondent to provide a status report on the investigation, which is pending. Counter affidavits were filed by the Commercial Tax Department, questioning the authenticity of the petitioner's claim regarding the surrender of registration on a holiday. The court found discrepancies in the petitioner's submission and directed verification of transactions from the electronic file and IP address to determine the validity of the claim.The court disposed of the writ petition by instructing the respondents to verify the IP address used for transactions during the disputed period to identify the source of wrongful input tax credit. A forensic examination of records was mandated, and the first respondent was directed to issue a fresh order based on the findings. Given the involvement of the Information Technology Act, 2000, the Commercial Tax Department was asked to seek assistance from the Cyber Crime Cell of the State of Tamil Nadu. The writ petition was closed without costs, concluding the matter with the specified directions for further action.