2025 (11) TMI 1333 - HC - VAT / Sales Tax

Input tax credit reversal on technical grounds under Rule 29(2)-(3) quashed; matter remanded for fresh consideration

M/s B.P. Oil Mills Ltd. Versus The Commissioner Of Commercial Tax U.P. Lucknow

HC held that where the dealer's books of account and statutory forms (Form 38 and Form C) duly evidenced intra- and inter-State purchases, and no defect ... Denial of ITC - petitioner has failed to maintain its books of account for claiming the benefit - Case of petitioner is that there is no violation of Rule 21 (1) sub clause (v) but without considering the same, by the impugned order, appeal has been rejected only placing reliance upon Rule 29 (2) & (3) - HELD THAT:- It is not in dispute that the revsionist has purchased the goods within the State as well as from outside the State of UP. For purchase of goods from outside the State of UP, Form 38 and Form C have been produced by the dealer, which shows that while importing the goods, the same was duly recorded in the books of account. The said fact is also verifiable from the assessment order. For the purposes of purchase within the State or out side the State of UP by importing the goods, Form 38 was used for availaible concession Form C was issued, which are duly verifiable from the books of account maintained by the revisionist. Once no defect has been found in the books of account as evident from the assessment order itself, then merely on technical ground, the input tax credit claimed by the revisionist could not be reversed - The revisionist has made certain grounds with regard to the aforesaid facts. Though the Tribunal has noticed the same but has neither denied nor recorded any adverse observation while passing the impugned order, therefore, matter requires re-consideration by the Tribunal. The matter is remanded to the Tribunal, who after considering the grounds raised by the revisionist, pass a fresh order, without being influenced with any observation made herein above, within a period of three months from the date of producing a certified copy of this order - Revision disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether input tax credit may be denied solely on the ground of non-compliance with Rule 29(2) & (3) where the dealer has maintained books of account and produced statutory forms (Form 38 and Form C) evidencing inter-State purchases and concessional purchases. 2. Whether the statutory requirement in Section 21(10)(v) (maintenance of separate accounts 'as far as possible' where goods are disposed of in different modes including consignments outside the State otherwise than by sale) was satisfied by the dealer's records and, if so, whether a technical non-compliance can justify reversal of input tax credit. 3. Whether the Tribunal erred in dismissing the appeals without recording adverse findings on the veracity or sufficiency of the books of account and supporting documents relied upon to claim input tax credit. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Denial of input tax credit based solely on Rule 29(2) & (3) non-compliance Legal framework: Input tax credit is claimable subject to compliance with statutory record-keeping rules; Rule 29(2) & (3) set particular requirements for claiming credit. Section 21 mandates maintenance of accounts and documents by dealers. Precedent Treatment: No prior decisions were cited or relied upon by the Court in the judgment; therefore no precedent was followed, distinguished or overruled in relation to this specific fact pattern. Interpretation and reasoning: The Court observed that the dealer produced Forms 38 and C and had its purchases and inter-State imports reflected in the books of account. The assessment accepted disclosed turnover and the assessing authority recorded findings of fact. In the absence of adverse material or defects identified in the books, the Court held that denial of input tax credit purely on a technical non-compliance under Rule 29(2) & (3) was not justified. Ratio vs. Obiter: Ratio - where statutory forms and books of account substantiate inter-State purchases and manufacturing turnover, reversal of input tax credit cannot rest solely on technical non-compliance with Rule 29(2) & (3) absent adverse material. Conclusions: The Tribunal's reliance solely on Rule 29(2) & (3) to reverse input tax credit was inadequate; matter requires reconsideration in light of the books and statutory forms. Issue 2 - Sufficiency of records under Section 21(10)(v) and the meaning of 'as far as possible' Legal framework: Section 21 prescribes accounts and documents to be maintained; sub-clause (10)(v) requires, insofar as possible, separate accounts where a dealer disposes of taxable goods in multiple ways including consignments outside the State otherwise than as a result of sale. Precedent Treatment: No case law was invoked to define 'as far as possible' or to interpret the extent of strictness required; the Court interpreted the statutory language on its text. Interpretation and reasoning: The Court emphasized the qualifying words 'as far as possible' in Section 21(10)(v), indicating a degree of practical flexibility in record keeping. Given production of purchase records, Form 38, Form C, stock and manufacture registers and absence of adverse findings in assessment, the statutory requirement was satisfied to the extent mandated by the statute. Ratio vs. Obiter: Ratio - the statutory obligation to keep separate accounts 'as far as possible' must be read with practical sufficiency; compliance reflected in books and statutory forms meets the requirement unless defects are specifically established. Conclusions: The dealer's records, including stock and manufacturing registers together with Forms 38 and C, fulfilled the requirements of Section 21(10)(v) as interpreted; technical non-compliance cannot be a sole basis for rejecting input credit where substantive compliance exists. Issue 3 - Need for explicit adverse findings before rejecting claims supported by accounts Legal framework: Administrative and appellate bodies should record clear findings when disallowing claims supported by books and documents; appellate re-examination requires addressing grounds raised by the taxpayer. Precedent Treatment: None cited; Court applied principles of reasoned decision-making and requirement for addressing material factual claims. Interpretation and reasoning: The Tribunal noticed the grounds raised regarding maintenance of books and supporting documents but did not record adverse observations or deal substantively with those grounds in its impugned order. The Court found that in absence of explicit adverse findings on the veracity or sufficiency of the accounts, the matter could not be finally resolved against the claimant without reconsideration. Ratio vs. Obiter: Ratio - an appellate/tribunal order rejecting a claim supported by books and statutory forms must either record specific adverse findings or reconsider the claim on merits; lack of such findings necessitates remand. Conclusions: The impugned Tribunal order was deficient for failing to record adverse material or to deal substantively with the records relied upon; remand for fresh consideration was warranted. Remedial Direction and Consequential Findings Interpretation and reasoning: In view of the deficiencies, the Court remanded the matter to the Tribunal for fresh disposal within a specified timeframe and directed that any amounts deposited shall remain subject to the fresh order. Ratio vs. Obiter: Ratio - where an appellate order fails to deal with patently material documentary evidence or to record adverse findings, remand for fresh consideration is appropriate; directions as to deposits are incidental to the remand. Conclusions: The Tribunal is directed to reconsider the grounds raised, examine the books of account and statutory forms (Form 38 and Form C), and pass a fresh reasoned order. The prior deposit status remains subject to the Tribunal's fresh decision.