2016 (8) TMI 1338 - HC - VAT and Sales Tax

Validity of assessment order - TNVAT Act - it was alleged that petitioner had claimed excess ITC than the sales reported by the seller to a particular amount and there is a discrepancy - it was also alleged that the petitioner has claimed input tax credit for the purchases from the registration cancelled dealers. Whether the input tax credit can be denied to the petitioner for the reason that the seller had not been assessed or the selling dealer has not filed the returns? - Held that - This issue is no longer res integra and has been decided by this Court in the case of Althaf Shoes (P) Ltd. vs. Assistant Commissioner (CT), Valluvarkottam Assessment Circle, Chennai-6 2011 (10) TMI 567 - Madras High Court , where it was held that so long as the purchasing dealer has complied with the requirements as given under rule 10(2), the claim of the purchasing dealer cannot, by any length of reasoning, be denied by the Revenue. The basis on which the impugned order has been passed denying the entire tax credit on verification of the Departmental website alleging that the petitioner has reported higher purchase and availed ITC in excess cannot be sustained - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to assessment orders under TNVAT Act for multiple years based on claimed excess ITC and purchases from registration cancelled dealers.

Analysis:
The petitioner, a registered dealer under TNVAT Act and CST Act, contested assessment orders for 2010-11 to 2014-15 due to claimed discrepancies. The issues were excess ITC claims compared to reported sales and ITC for purchases from cancelled dealers. The petitioner argued for ITC based on Act conditions and seller responsibility for reporting. The respondent held burden of proof on the dealer and overruled objections on the first issue but accepted corrected registration numbers for the second issue.

The key legal issue was whether ITC denial was justified due to unassessed sellers or non-filing dealers. Citing precedents like Althaf Shoes and Infiniti Wholesale Limited, the court emphasized that ITC cannot be denied solely on seller assessment grounds. The court highlighted that as long as vendors are registered and purchasers comply with rules, ITC claims should not be rejected. The court emphasized that the revenue must act against non-compliant vendors rather than penalizing compliant purchasers.

The court applied previous decisions to the current case, finding the impugned order's basis unsustainable. The court quashed the assessment orders, citing similarities with past cases and emphasizing the incorrect denial of entire tax credit based on website verification. Consequently, the writ petitions were allowed, assessment orders were quashed partially, and no costs were awarded.