2015 (2) TMI 372 - HC - VAT and Sales Tax

Deletion of interest and penalty - Carried forward ITC - Held that - From the observation of the Tribunal, it appears that though the assessing officer had raised additional tax demand of ₹ 76,010/and imposed interest and penalty on such basis, the Tribunal was of the opinion that the assessee had sufficient Input Tax Credit and those tax credits could have been adjusted against the assessee s additional assessed tax liability. That being the position, the Tribunal correctly held that the interest could not be charged. Further, we notice Section 34(7) of the Gujarat Value Added Tax Act, which pertains to the power of the Commissioner to impose penalty, begins with the expression if a Commissioner is satisfied that the dealer, in order to evade or avoid payment of tax........ Under the circumstances, the basic intention of attempting to evade or avoid payment of taxes would be necessary for imposing penalty. - When the Tribunal found on facts that in view of availability of input tax credit as against the assessed additional tax, there was no intention on part of the assessee to avoid payment of taxes, no question of law arises - Decided against Revenue.

Summary

Issues:
- Appeal against the judgment of the Gujarat Value Added Tax Tribunal
- Deletion of interest and penalty by the Tribunal
- Interpretation of Section 34(7) of the Gujarat Value Added Tax Act

Analysis:
1. The State appealed against the Gujarat Value Added Tax Tribunal's judgment, questioning the deletion of interest and penalty. The Tribunal held that the appellant, who had paid the tax in full, was entitled to claim excess Input Tax Credit (ITC) for the next tax period. The Tribunal reasoned that the appellant was not liable to pay interest on tax demand as the ITC could be adjusted against the current year's liability as per Rule 18. The Tribunal found that the appellant had enough ITC to offset the additional tax liability, leading to the removal of interest and penalty.

2. The Tribunal's observation revealed that despite the assessing officer imposing additional tax demand, interest, and penalty, the appellant had ample ITC to adjust against the assessed tax liability. The Tribunal correctly concluded that in such a scenario, interest could not be levied. Additionally, the judgment highlighted Section 34(7) of the Gujarat Value Added Tax Act, emphasizing that the imposition of a penalty by the Commissioner required satisfaction that the dealer intended to evade or avoid tax payment. Thus, the Tribunal's decision was based on the absence of any intention on the part of the assessee to evade tax payment, leading to the dismissal of the tax appeal and civil application.

3. The Tribunal's findings, supported by the provisions of Rule 18 and Section 34(7) of the Act, established that the appellant had legitimately utilized the available ITC to offset the additional tax liability, thereby negating any grounds for charging interest or penalty. The judgment underscored the importance of assessing the intention to evade tax payment before imposing penalties, ensuring a fair and just application of tax laws. Consequently, the High Court upheld the Tribunal's decision, affirming the dismissal of the appeal and application.