2014 (9) TMI 921 - HC - VAT and Sales Tax

Cancellation of registration - Denial of credit of input tax - Tax Invoice 9R s and gate passes issued by M/s Heena Timbers were not accepted - assessment of tax was thereafter made on the basis of best judgment assessment - Held that - There is no finding recorded by the Tribunal that the Tax invoices for claiming benefit of input tax credit was not genuine and in the absence of such an exercise no liability to tax or penalty could have been imposed against the revisionist-Firm. - order of the Tribunal is absolutely illegal and arbitrary and is accordingly set aside and the matter is remitted to the Tribunal - Decided in favour of assessee.

Summary

Issues:
Disallowed credit of input tax, forged tax invoices, liability for tax evasion, penalty under U.P. VAT Act, genuineness of invoices.

Analysis:

The revisionist, a registered dealer, challenged the disallowance of input tax credit by the Assessing Authority for the year 2008-09. The purchases in question were made from M/s Heena Timbers, a registered dealer whose registration was later canceled due to alleged fraudulent activities. Despite possessing tax invoices and gate passes from M/s Heena Timbers, the revisionist's claim was rejected, and a best judgment assessment was conducted. The revisionist's appeal to the Addl. Commissioner and Commercial Tax Tribunal was unsuccessful, primarily on the grounds of the alleged forgery of tax invoices and non-payment of VAT by M/s Heena Timbers.

The revisionist contended that they had no reason to doubt the authenticity of the tax invoices provided by M/s Heena Timbers and should not be held liable for any tax evasion by the latter. The Tribunal's presumption of fraudulent sale based on cash transactions and unrecorded sales by M/s Heena Timbers was deemed arbitrary and illegal by the revisionist's counsel. Additionally, the imposition of penalty under section 54(1)(19) of the U.P. VAT Act was challenged, as the revisionist's books and registers were found to be accurate, and no discrepancies were noted by the Revenue.

The revisionist argued that the Tribunal failed to establish the genuineness of the tax invoices and erroneously imposed tax and penalty without proper verification. Citing a precedent, the revisionist emphasized the requirement for the Revenue to prove the invoices' lack of authenticity when challenging input tax credit claims. As the Tribunal did not provide any findings on the legitimacy of the tax invoices, the revisionist asserted that no tax or penalty should have been levied.

Consequently, the High Court found the Tribunal's order to be illegal and arbitrary, setting it aside and remitting the matter for reconsideration. The revision was allowed, highlighting the need for a thorough review based on the observations made in the judgment.