2012 (2) TMI 452 - HC - VAT and Sales Tax

Input tax credit - disallowance on the ground that the registration of M/s. Karat 24 from whom the petitioner purchased bullion was cancelled on February 28 2010 - Held that - section 13(1) of the 2005 Act entitles input-tax credit to the VAT dealer for the tax charged in respect of all purchases of taxable goods made by that dealer during the tax period. The failure on the part of M/s. Karat 24 to file returns or remit the tax component of the sales made to the petitioner cannot per se be a ground to deny input-tax credit - the invoices produced by the petitioner are not fraudulent or in dispute that it had been issued by M/s. Karat 24 or that the purchaser did not in fact obtain the invoices from the registered dealer - input tax credit cannot be denied - petition allowed - decided in favor of petitioner.

Issues: Assessment order disallowing input-tax credit and levy of penalty interest based on cancellation of registration of a dealer.

Analysis:
The judgment delivered by the High Court of Andhra Pradesh involved the assessment order passed by the first respondent disallowing input-tax credit to the petitioner, a partnership concern engaged in the business of gold and jewellery, based on the cancellation of registration of the selling dealer, M/s. Karat 24. The court examined the grounds of disallowance and the subsequent levy of penalty interest by the first respondent. The petitioner had purchased bullion from M/s. Karat 24 during a specific tax period and claimed input-tax credit. However, it was discovered that M/s. Karat 24 had its registration cancelled after the transaction took place, leading to the disallowance of input-tax credit and imposition of penalty interest.

The petitioner contended that despite the cancellation of registration of M/s. Karat 24, it was entitled to claim input-tax credit as the selling dealer had issued valid invoices verifying the deduction of tax on the purchases made by the petitioner. The court referred to previous judgments, including Sri Ramanjaneya Groundnut Factory and State of A.P. v. Thungabhadra Industries Ltd., to establish the principle that denial of input-tax credit solely based on the failure of the selling dealer to file returns or remit tax is not justified. The court highlighted that the invoices produced by the petitioner were not disputed as fraudulent, and the registration cancellation of M/s. Karat 24 occurred after the transaction in question, where valid vouchers were produced.

Based on the legal precedents and the provisions of the Andhra Pradesh Value Added Tax Act, 2005, the court allowed the writ petition filed by the petitioner. The court quashed the assessment order disallowing input-tax credit and the demand for penalty interest, providing the first respondent with the opportunity to pass a revised assessment order only if there is substantial evidence to deny input-tax credit, excluding the ground of non-remitting tax by M/s. Karat 24. The judgment emphasized that the cancellation of registration post-transaction does not automatically invalidate the input-tax credit claim of the petitioner, especially when valid documentation was presented.

In conclusion, the court granted relief to the petitioner, setting aside the assessment order and penalty interest demand, while leaving room for a revised assessment based on valid grounds other than the non-remittance of tax by the selling dealer. The judgment underscored the importance of valid documentation and adherence to legal principles in determining the eligibility of input-tax credit under the tax laws.

← Previous Next →