2014 (12) TMI 1243 - HC - VAT and Sales Tax

Input tax credit - genuineness of purchase - It is stated that unless the tax collected on sales by the selling dealer is remitted to the Government, the set-off of tax paid on purchase from such dealer does not qualify for rebate/input-tax credit - The submission of the learned Additional Government Advocate is that for having found some discrepancies, the notice has been issued under section 39(1) of the Act. In the event, the petitioner furnishes all the documents that could be looked into and the matter could be closed and subsequently, demand would be raised depending upon the correctness of the documents produced by the petitioner. However, the stand of the counsel for the petitioner is that it is not only the purchase of goods but, they have collected the tax at their level which could have been taken note by the Department where they have collected the tax and the same has been remitted to the Government or that could have been taken for reassessment, if there is any suppression or misrepresentation. Held that - it is for the respondent-authorities, before passing the order, to call upon the petitioner to submit the documents and consider the said documents produced, give an opportunity of hearing to the petitioner and thereafter, pass appropriate orders in accordance with law. - Petitioner may be given due opportunity to cross-examine the dealers who have filed the returns to ascertain whether there may be suppression at their level.

Summary

Issues:
Challenging proposition notice under section 39(1) of the Karnataka Value Added Tax Act, 2003 for the assessment period April 2011 to March 2012 and seeking verification of tax invoices issued by selling dealers.

Analysis:
The petitioner, a registered dealer, challenged a notice issued under section 39(1) of the Act for the assessment period April 2011 to March 2012. The petitioner contended that they had filed correct turnover declarations and paid taxes, which were accepted by the authorities. However, discrepancies were allegedly found during an audit, leading to a notice proposing tax levy on the discrepancies. The petitioner claimed input tax credit based on purchases from registered dealers with valid TIN numbers and produced tax invoices as required by the Act.

The respondent authorities issued the notice proposing to disallow input tax credit, arguing that the petitioner had claimed credit based on false tax invoices. They emphasized that tax must be levied and collected by the selling dealer and deposited in the Government Treasury for a valid sale to occur. Mere issuance of invoices and filing returns was deemed insufficient for claiming input tax credit. The petitioner, citing section 10(4) of the Act, asserted their entitlement to input tax credit and maintained that they had complied with invoicing requirements.

The court directed the respondent authorities to review documents provided by the petitioner, afford an opportunity for the petitioner to be heard, and consider input tax credit claims in accordance with the law. The authorities were instructed to verify if tax had been collected by the selling dealers and remitted to the Government. The petitioner was granted one month to appear before the authorities, during which reassessment proceedings were put on hold. Additionally, the petitioner was scheduled to appear for cross-examination of dealers on a specified date to ascertain potential suppression or misrepresentation.

In conclusion, the petitions were disposed of with the directive for the petitioner to appear before the authorities for further proceedings. The Additional Government Advocate was required to file a memo of appearance within four weeks.