Confirmation by Supplier

[Siraj Shaikh]

I purchased some goods from a suuplier of Rs. 344551 (TAX rate 5%) in the year 2004-05 and made the payment by cheque. During the VAT assessment, Our Sales Tax Officer has received the confirmation from my supplier of Rs. 103,365. The STO is asking for the confimation of 100% amount or else he will raise the demand on us for the balance VAT.

We made several follow up with the Supplier to give the confirmation of the 100% payment.

We have got all the invoices and bank statement to prove that the payment has been made to the supplier.

Still,our consultant advised us the the STO is authorised to raise the demand on us for the differential amount.

Can someone throw some lights on the clairty of the law ????

[YAGAY andSUN]

Once you have paid the tax on your purchase then nothing left to the MVAT Department to tax on purchases which had not been confirmed by your supplier in terms of receipt of payment against these purchases.  It seems that MVAT Department is acting on suspicion.

In this scenario, please ask you supplier to co-operate with you to get rid of any unwanted situation.

Further, as per Geru Lal judgment ( P&H ), if you had paid VAT on your purchases and your supplier don't deposit the tax to the Government, even then, bonafide dealer can't be restricted to avail the ITC.

 

[YAGAY andSUN]

Please discuss with your consultant that which Section or Rule the STO is empowered to raise the demand on you under abovementioned sceanario whether it is under best judgment assessment.

Please get the clarification and share it with me to further discussions.

[YAGAY andSUN]

Please go throuhg the Section 23 of the MVAT Act on the aforesaid matter.

AI Summary

Input tax credit entitlement may not be denied when purchaser paid VAT and holds payment evidence against supplier. Purchaser paid for goods by cheque and retains invoices and bank statements. The STO, relying on a supplier confirmation showing a lesser amount, seeks full supplier confirmation or will demand the differential VAT. Advisers state that a purchaser who has paid VAT and holds payment evidence should not be barred from claiming input tax credit even if the supplier has not deposited tax; supplier cooperation and scrutiny of the statutory basis for the demand, including Section 23 of the MVAT Act, are advised.