TaxTMI 
TaxTMI 
2015 (1) TMI 233
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....O. 984 of 2013 With CIVIL APPLICATION NO. 669 of 2013 In TAX APPEAL NO. 984 of 2013 With TAX APPEAL NO. 985 of 2013 With CIVIL APPLICATION NO. 670 of 2013 In TAX APPEAL NO. 985 of 2013 With TAX APPEAL NO. 986 of 2013 With CIVIL APPLICATION NO. 671 of 2013 In TAX APPEAL NO. 986 of 2013 With TAX APPEAL NO. 987 of 2013 With CIVIL APPLICATION NO. 672 of 2013 In TAX APPEAL NO. 987 of 2013 With TAX APPEAL NO. 1034 of 2013 With CIVIL APPLICATION NO. 684 of 2013 In TAX APPEAL NO. 1034 of 2013 With TAX APPEAL NO. 1087 of 2013 With CIVIL APPLICATION NO. 700 of 2013 In TAX APPEAL NO. 1087 of 2013 With TAX APPEAL NO. 1088 of 2013 With CIVIL APPLICATION NO. 701 of 2013 In TAX APPEAL NO. 1088 of 2013 MR. M.R. SHAH AND MR. R.P.DHOLARIA, JJ. MR MANISH K KAJI, ADVOCATE FOR THE APPELLANT MR JAIMIN GANDHI, ASSTT. GOVERNMENT PLEADER FOR THE RESPONDENT COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] As common question of law and facts arise in this group of appeals and they arise out of the impugned common judgment and order passed by the learned Gujarat Value Added Tax Appellate Tribunal, Ahmedabad [hereinafter referred to as "Tribunal"], all these appeals a....
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....unt to show that the payments were duly made by the account payee cheques to the vendors. It was further contended on behalf of the appellant that since vendors' registration was cancelled subsequently, the genuine transactions on which tax credit was claimed in the year 2006-07, could not be disallowed merely because the registration certificate of the said vendor was cancelled retrospectively. [2.1] That the Deputy Commissioner on appreciation of evidence and documentary evidences produced on record did not accept the submissions made on behalf of the appellant and passed the assessment order under the Act on 11.02.2001. That in the said assessment order, the Deputy Commissioner disallowed the claim of input tax credit on the purchases of Rs. 2,84,153/made from one M/s. Mangal Enterprise holding registration No.24140503950 by specifically observing that the registration certificate of the said vendor has been cancelled ab initio as the said vendor is involved in billing activity. That in the said assessment order the Deputy Commissioner also disallowed the appellant's claim of input tax credit on the purchases of Rs. 5,69,03,694/made from M/s. Shree Bhavani Ispat, Bhavnaga....
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.... tax credit is claimed by the respective appellants are not genuine and they are merely based on billing activities. However, quashed and set aside the orders qua levy of penalty and remanded the matter to the assessing authority to examine the issue of levy of penalty afresh by observing that Assessing Officer has not made any discussion nor he has explained as to why such exorbitant penalty is levied despite the fact that discretion is given to him to levy any penalty between the minimum as well as maximum. [2.4] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Tribunal insofar as confirming the respective assessment order denying input tax credit claimed by the respective appellants, the appellants herein - original appellants have preferred the present tax appeals with the following proposed substantial questions of law. 1. "Whether in law and of facts of the case the Tribunal was right in deciding the appeal when the Joint Commissioner had not passed the appeal on merits but dismissing it only for non payment of predeposit? &nbs....
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....goods purchased was made by account payee cheques and that the cheques were cleared in the account of the vendor and the vendor had shown the same as sales in their accounts and provided for tax. (iv) that the department has accepted the sales made by the appellant and not challenged the purchases. (v) that the additions have been made as vendors registration have been cancelled ab initio and that the case of the vendor was also heard but the order, in the case of the appellant has been passed first whereas the order in the case of the vendor is still not passed." [3.0] Shri Manish Kaji, learned advocate has appeared on behalf of the respective appellants and Shri Jaimin Gandhi, learned AGP has appeared on behalf of the State and the Department. [3.1] Shri Kaji, learned advocate appearing behalf of the respective appellants has vehemently submitted that the learned Tribunal has materially erred in considering the appeals on merit and considering the assessment orders on merits. It is submitted by Shri Kaji, learned advocate appearing on behalf of the respective appellants that as such the second appeal before the learned Tribunal was agai....
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....ed that therefore the learned Tribunal has materially erred in addressing itself on the merits of the case against the assessment order. Therefore, it is requested to remand the matter to the learned Tribunal for fresh consideration and to consider the legality and validity of the order passed by the Joint Commissioner - first appellate authority directing the appellant to make the deposit of predeposit only. [3.2] Shri Kaji, learned advocate appearing on behalf of the respective appellants has also made submissions on merits. He has reiterated what was submitted before the learned Tribunal. [3.3] It is vehemently submitted by Shri Kaji, learned advocate appearing on behalf of the appellants that the learned Tribunal has materially erred in confirming the assessment order denying input tax credit claimed by the respective appellants solely on the ground that the vendor's registration from whom the respective appellants have purchased the goods, has been cancelled retrospectively and ab initio. [3.4] It is submitted that the learned Tribunal has materially erred in not relying upon the decision of the Tribunal in the case of M/s. Shree Kiran Oil Mill rendered in Second Appe....
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....ter to the learned Tribunal directing the learned Tribunal to consider the documentary evidences produced, which is part of the paper book and to give the opportunity to the appellant to prove the actual physical movement of the goods purchased from the aforesaid two vendors produced by the appellant on which input tax credit is claimed. No other submissions have been made. Making above submissions and relying upon the documents produced along with the paper book, it is requested to allow the present appeals and quash and set aside the impugned orders passed by the learned Tribunal. [4.0] All these appeals are opposed by Shri Jaimin Gandhi, learned AGP appearing on behalf of the State. It is submitted by Shri Gandhi, learned AGP that the impugned judgment and order passed by the learned Tribunal insofar as confirming the denial of the input tax credit claimed by the respective appellants is absolutely just and proper and as such there are concurrent findings of facts by both the authorities that the sale transactions on which the input tax credit have been claimed are not genuine and only they were billing activities and as such there was no movement of goods at all. It is su....
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.... Tribunal that the sale transactions are not genuine and there were only billing activities only for the purpose of getting the tax credit and looking to the modus operandi of evading the taxes, both the Assessing Officer as well as the learned Tribunal have rightly denied the input tax credit claimed by the respective appellants claimed under Section 11 of the Act. It is submitted that as such the denial of input tax credit claimed by the respective dealers/appellants is absolutely in consonance with the provisions of the Act more particularly section 11 of the Act. It is submitted that as such the onus is upon the dealer, who claimed the input tax credit, to prove the genuineness of the transactions, which the appellants - dealers have failed to establish and prove. It is submitted that therefore in the facts and circumstances of the case, the decision of the Tribunal in the case of M/s. Kiran Oil Mill is not rightly applied by the Assessing Officer as well as the learned Tribunal. [4.3] It is further submitted by Shri Gandhi, learned AGP that whether a transaction is genuine or bogus is a question of fact and not a question of law. In support of his above submissions, he has ....
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....s under: Let us say we are concerned with dealerC. DealerC purchases goods from dealerA in the gray market at Rs. 80 (Normal price is Rs. 100). Since the transaction is in the gray market, it is recorded neither in the books of account of A nor in the books of accounts of C. So as to convert this purchase from gray market into purchase from normal market, C enters into an agreement with B to issue bogus bills on commission basis. Accordingly B issues bills/invoices of sale at Rs. 100 to A on commission basis (2%). The transaction is recorded as sale of Rs. 100 in the books of account of B. The transaction is recorded in the books of account of C as purchases of Rs. 100. Further so as to give a colour of genuine transaction, C will issue cheque, either account payee or otherwise to B. B will deposit the cheque in its Bank account and after deducting its commission (Rs.2), B will withdraw the balance amount (Rs.98) and pay back to C. However if A and B have designed a chain of transactions, then B will pass the money to X, X to Y and so on and some one else in place of B may pay the balance amount to....
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....gus. It is further submitted that appellant was subsequently called to establish the genuineness of purchase by proving physical movement of goods from M/s. Shree Bhavani Ispat and M/s. Mangal Enterprise to the appellant and the appellant has failed to do the same. [4.10] Now, so far as the contention on behalf of the assessee that the transactions are recorded in books of accounts, its sales are accepted by the revenue, the payment is paid by account payee cheque, are all dealt with by this Court in the case of Sanjay Oilcake Industries (Supra). It is submitted that after considering all the contentions, this Court took a view that the purchases were bogus. Learned AGP has further relied on the judgment of this High Court in the case of Happy Oil Industries (Supra), wherein this Court has taken a view that the onus is on dealer to establish the physical movement of goods / genuineness of purchases. [4.11] It is submitted that in the present case the appellant has filed a paper book running into 400 pages, however only relevant pages regarding the physical movement of goods are page Nos.77, 79 and 81 and pages 83 - 265 are stock register, which is internal evidence. Page 2833....
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.... physical movement of goods so there is no question of them being ignored by the tribunal and so the order of Tribunal is not perverse. [4.14] It is submitted that therefore when the appellant/s have failed to provide any documentary evidences regarding physical movement of goods from M/s. Shree Bhavani Ispat and M/s. Madhav Steel Corporation to the respective appellants/dealers and therefore, the sale transactions are not found genuine and are found to be bogus and are found to be billing activities only, no error has been committed by the Assessing Officer as well as the learned Tribunal in denying the input tax credit claimed by the appellants/dealers. Making above submissions and relying upon above decisions, it is requested to dismiss the present appeals. [5.0] Heard learned advocates appearing on behalf of respective parties at length. Perused the impugned judgment and order/s passed by the learned Tribunal. We have also gone through and considered in detail the documents/documentary evidences forming part of the paper book supplied by the learned advocate appearing on behalf of the appellants. &nbs....
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....order may please be issued against the recovery of dues. c) The assessment order passed by learned Deputy Commissioner of Commercial Tax, Range18, Valsad and summarily rejection order passed in appeal by the learned Joint Commissioner of Commercial Tax, Appeals2, Vadodara may please be modify by holding thati) The appellant is entitled to tax credit u/s. 11 of VAT Act on the purchases made of Rs. 284153/net of tax made from M/s. Mangal Enterprise, Bhavnagar and Rs. 56903694/net of tax made from M/s. Shree Bhavani Ispat, Bhavnagar in the facts and circumstances of the case. ii)The interest charged u/s. 30(5) of the VAT Act of Rs. 1828540/and penalities charged of Rs. 2285008/u/ s. 34(7) of VAT Act and Rs. 3728319/under Section 34(12) of VAT Act are unjustified and not tenable in law. d) Any other just and proper order may be passed as may be deemed fit in the facts and circumstances of the case. [5.2] It is also required to be noted that even the learned advocate appearing on behalf of the appellant made elaborate submissions on merits against the Assessing Officer passed by the Deputy Commissioner. Under the circumstances....
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....ecision on merits. When the written submission was made on merits against the order of assessment and the learned Tribunal dealt with and considered the same and thereafter dismissed the appeals on merits, thereafter having lost on merits, it is not open for the appellant to make aforesaid grievance. If despite submitting the case on merits, the Tribunal had not dealt with the appeals on merits, in that case, the appellant would make the grievance of non consideration of appeal on merits, though submissions have made. When pointed out question was asked to the learned advocate for the appellant that if the appellant would have succeeded on merits in the appeal, the appellant would have raised aforesaid grievance, the learned advocate for the appellant has fairly conceded that in such case the appellant would not have made such grievance. Under the circumstances, when the appellant made submissions on merits against the order of assessment as if the appeals before the Tribunal were against the order of assessment and when the Tribunal has dealt with and considered the same and decided the appeals on merits and when appellant has lost in the appeals on merits, thereafter it not open ....
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.... by the Assessing Officer insofar as imposing maximum penalty is concerned and has remanded the matter to the Assessing Officer. Thus, the impugned judgment and order passed by the learned Tribunal is partly in favour of the appellant - dealer against which the appellant/s have not made any grievance. In any case as observed hereinabove, no error has been committed by the learned Tribunal in entering into the merits of the case and decided the appeal on merits and against the order of assessment passed by the Assessing Officer. Under the circumstances, proposed question No.1 is answered against the appellant - dealer/s and in favour of the revenue. [6.0] Now, so far as the rest of the proposed questions of law and the submissions made by the learned advocate appearing on behalf of the appellant that the learned Tribunal as well as the Assessing Officer have materially erred in not holding the sale transactions to be genuine and in treating the same as billing activities only and the submission / contention on behalf of the appellant that the learned Tribunal has not considered the documentary evidences on record forming part of the paper book such as invoices, weigh bridge, stoc....
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....act there was no physical movement of the goods. If there were no goods with the vendors which were alleged to have been sold to the appellants - dealers, naturally there cannot be any physical movement of the goods. The appellants/dealers could prove the genuineness of the transactions not only from the cheques alleged to have been paid to the vendors but as such by proving actual physical movement of the goods, which the appellants/dealers have failed to prove. It cannot be disputed that as such the onus to prove the genuineness of the purchase is on the assessee/dealer. Even the onus to prove the genuineness of the purchase of the dealer from whom the appellant - dealers made purchases is also on the dealer. The aforesaid is supported by the decision of the Division Bench of this Court in the case of Happy Oil Industries (Supra). Under the circumstances, when even considering the documents on record forming part of the paper book, which have been relied upon by the learned advocate appearing on behalf of the appellant/s, the appellant/s - dealer/s have failed to prove the actual physical movement of the goods alleged to have been purchased from the aforesaid two vendors namely M....