2015 (3) TMI 1196 - HC - VAT and Sales Tax

Tribunal deleted the demand of interest and penalty - Adjustment of input tax credit towards the output tax liability for the assessment year in question - Gujarat Value Added Tax - Held that - it is fairly conceded by Shri Chintan Dave, learned AGP appearing on behalf of the appellant that now the aforesaid question / issue is squarely covered against the Revenue in view of the decision of the Division Bench of this Court dated 19.01.2015 in the case of State of Gujarat vs. Dashmesh Hydraulic Machinery wherein it was held as, It is not in dispute that the Assessee had no surplus balance of input credit, which has been adjusted against the demand of tax upon reassessment. Under these circumstances, the element of avoidance of tax could be said as lacking. - Decided against the revenue.

Summary

Issues:
1. Interpretation of input tax credit adjustment for output tax liability.
2. Deletion of interest and penalty by the Gujarat Value Added Tax Tribunal.

Interpretation of Input Tax Credit Adjustment:
The High Court addressed the issue of input tax credit adjustment towards output tax liability. Initially, two substantial questions of law were framed regarding the tribunal's decision. However, it was later clarified that the first question did not apply to the case. The Court referred to a previous judgment where it was held that the availability of input tax credit against the assessed additional tax liability negated the intention to evade tax. The tribunal's decision to delete interest and penalty was based on the fact that the assessee had sufficient input tax credit to offset the additional tax liability. The Court emphasized that the intention to evade or avoid tax was crucial for imposing penalties under the relevant tax act. As the tribunal found no such intention on the part of the assessee, the interest and penalty were rightly deleted. The Court dismissed the appeal, affirming the tribunal's decision in favor of the assessee.

Deletion of Interest and Penalty:
The Court examined whether the Gujarat Value Added Tax Tribunal was justified in deleting the interest and penalty imposed by the Revenue. The appellant, representing the Revenue, acknowledged that a previous decision by the Division Bench had ruled against the Revenue in a similar case. Referring to the case law, the Court highlighted that the availability of input tax credit to offset the tax demand indicated a lack of intention to evade tax, thus justifying the deletion of interest and penalty. The Court emphasized that the absence of a surplus input credit balance further supported the conclusion that there was no tax avoidance. Consequently, the Court ruled in favor of the assessee, upholding the tribunal's decision to delete the interest and penalty. The Court dismissed the Tax Appeal, affirming the deletion of interest and penalty by the tribunal.