2014 (9) TMI 421 - HC - VAT and Sales Tax

Denial of input tax credit - cancellation of the few traders with retrospective effect - failure to prove the actual purchase of the goods from the vendors and as such there was actual moment of the goods at all on which the input tax credit was claimed - Held that - At the outset, it is required to be noted that the appellant claimed the input tax credit of ₹ 1,69,872/- on the purchase of the goods worth ₹ 42,46,800/- from M/s. Leela Trading company and other three vendors. In support of the above claim that they actually purchase the goods worth ₹ 42,46,800/- from M/s. Leela Trading Company and other three vendors, the appellant relied upon the invoices / bills and their books of profit and loss. However, it is required to be noted that not a single document and / or material was placed on record to show the actual movement of the goods from the vendors to appellant. The appellant miserably failed to prove the actual transaction by leading the cogent evidence and miserably failed to prove that purchase on which input tax credit was claimed, were genuine and / or on which the tax was paid. There are concurrent findings of fact given by all the authorities below that the alleged transaction / purchase worth ₹ 42,46,800/- from M/s. Leela Trading Company and three others, on which, the appellant claimed input tax credit of ₹ 1,69,872/- were not genuine and it was only billing activities for the purpose of claiming input tax credit etc. The aforesaid findings of facts recorded by all the authorities below are on appreciation of evidence and considering the material on record which are neither perverse nor contrary to the evidence on record. Decided against assessee.

Summary

Issues involved:
- Denial of input tax credit by the authorities
- Failure to prove actual purchase of goods
- Applicability of relevant case law
- Alleged cancellation of vendors' registrations
- Lack of evidence on actual movement of goods
- Genuineness of transactions and input tax credit claim

Analysis:
1. The appellant, a purchaser-dealer, claimed input tax credit on purchases worth Rs. 42,46,800 from multiple vendors during the assessment year 2007-08. However, the Assessing Officer (AO) denied the claim, stating that the vendors' registrations were canceled, and the appellant failed to prove actual purchase and movement of goods. The AO considered the purchases as billing activity for claiming input tax credit, leading to the denial of Rs. 1,69,872 credit.

2. Aggrieved by the AO's decision, the appellant appealed to the First Appellate Authority, which upheld the denial. Subsequently, a Second Appeal was filed before the Tribunal, which also confirmed the denial of input tax credit. The appellant then approached the High Court, raising several legal questions regarding the Tribunal's judgment.

3. The appellant argued that the denial of input tax credit was erroneous as they had evidence of stock, invoices, and books of account to support the purchases. The appellant heavily relied on the precedent set by the case of State of Maharashtra vs. Suresh Trading Co. to support their claim.

4. The respondent State, represented by the Assistant Government Pleader, contended that the appellant failed to prove the actual purchase and movement of goods, as no documentary evidence was presented. The State emphasized that the concurrent findings of all authorities below supported the denial of input tax credit.

5. After hearing both parties and examining the evidence and judgments, the High Court noted that the appellant could not establish the genuineness of the transactions or prove the actual movement of goods from the vendors. The court highlighted the lack of evidence showing tax payment on the alleged purchases, leading to the conclusion that the input tax credit claim was unjustified.

6. Regarding the appellant's reliance on the Suresh Trading Co. case, the High Court clarified that the denial of input tax credit in this case was not solely due to the cancellation of vendors' registrations. Instead, it was based on the lack of evidence supporting genuine purchases and movement of goods, distinguishing it from the circumstances of the cited case.

7. Ultimately, the High Court found no error in the decisions of the lower authorities to deny the input tax credit claim. With no substantial legal questions arising and consistent findings on the lack of genuineness in the transactions, the High Court dismissed the Tax Appeal and related Civil Application.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the court's reasoning leading to the dismissal of the appeal.