2015 (2) TMI 927 - HC - VAT and Sales Tax

Adjustment of carried forward input tax credit - Whether the Tribunal has committed any error in law and in facts in deleting the interest and penalty or not - Held that - As the demand is confirmed and the adjustment is permitted but the interest and penalty imposed are deleted - Assessee had no surplus balance of input credit, which has been adjusted against the demand of tax upon re-assessment. Under these circumstances, the element of avoidance of tax could be said as lacking. Consequently, the deletion of interest and penalty on the part of Tribunal could not be said as unjustifiable. In the event, when the issue is already covered by the referred decision 2015 (2) TMI 372 - GUJARAT HIGH COURT , we do not find that any substantial question of law would arise as sought to be canvassed. - Decided against Revenue.

Summary

Issues:
- Whether input tax carried forward should be adjusted against VAT liability?
- Whether reversal of carry forward of input credit is required in subsequent years?
- Whether liability of penalty and interest can be deleted by adjusting carried forward input tax credit?

Analysis:
1. The High Court analyzed the appeal by the Revenue regarding the adjustment of input tax credit against VAT liability. The Tribunal had found that there was a credit balance of input tax credit (ITC) available to the assessee, which could be adjusted against the tax demand, thereby negating the need for payment of tax. Consequently, the Tribunal deleted the interest and penalty imposed. The High Court upheld the Tribunal's decision, stating that if the tax was not recoverable due to the available credit, there was no basis for charging interest or penalty. The Court found no error in the Tribunal's decision.

2. Another issue raised in the appeal was the deletion of interest and penalty by the Tribunal based on the adjustment of carried forward input tax credit. The High Court referred to a previous decision where it was held that interest or penalty could not be imposed if there was no attempt to evade or avoid tax payment. In the present case, the assessing authority had demanded tax, interest, and penalty, but the Tribunal, after confirming the tax demand, deleted the interest and penalty. The Court agreed with the Tribunal's decision, emphasizing that if there was no surplus input credit to adjust against the tax demand, the element of tax avoidance would be lacking, justifying the deletion of interest and penalty.

3. The High Court also noted that the issue had already been addressed in a previous decision where the Tribunal had similarly deleted interest and penalty as the assessee had sufficient input tax credit to offset the additional tax liability. The Court reiterated that the intention to evade or avoid tax payment was crucial for imposing penalty, and in the absence of such intention, the deletion of interest and penalty was justified. As the issue was already settled by precedent, the Court found no substantial question of law to consider in the present appeal and dismissed it.

4. In conclusion, the High Court dismissed the Revenue's appeal, emphasizing that the situation mirrored previous cases where interest and penalty were deleted due to the availability of input tax credit to offset tax liabilities. The Court reiterated that the absence of surplus input credit indicated a lack of intention to avoid tax payment, justifying the deletion of interest and penalty. As the issue was already settled by previous decisions, the Court found no merit in the appeal and upheld the Tribunal's decision to delete interest and penalty.