2015 (4) TMI 211 - HC - VAT and Sales Tax

Imposition of penalty - Wrongful availment of input tax credit - Held that - on the admitted fact of wrongful availment of input tax credit, the provisions of Section 27 (4) (i) and (ii) squarely mandates levy of penalty. In the backdrop of the above said provision of law, we find that the Tribunal was correct in modifying the order of the Assessing Authority in the matter of levy of penalty as of one falling under Section 27 (4) (i) and further holding that it does not fall under Section 27 (4) (ii), as held by the Assessing Authority. Admittedly, it is the first detection of wrongful availment. We further find that the proviso to Section 27 (4), i.e., to provide for an opportunity to the assessee for showing cause against such imposition of penalty, has also been complied with and the assessee has not chosen to rebut the same. In such view of the matter, we find that there is no error of law warranting interference with the order passed by the Tribunal and this Court concurs with the finding of the Tribunal. - No question of law arises - Decided against assessee.

Summary

Issues:
- Dispute over input tax credit availed by the appellant
- Validity of penalty imposed under Section 27 (4) (ii) of the Act

Analysis:
1. The appellant, a dealer in food and drinks, was assessed based on the return filed for the year 2008-2009 under the Tamil Nadu Value Added Tax Act, 2006. The Assessing Officer found that the appellant had wrongfully availed input tax credit on the sale of food and drinks, including sweets, savouries, and beverages. The Assessing Officer reversed the input tax credit and imposed a penalty of 100% under Section 27 (4) (ii) of the Act.

2. The appellant appealed to the Appellate Deputy Commissioner, who upheld the reversal of input tax credit but set aside the penalty, citing the lack of mens rea on the part of the appellant. The Revenue then appealed to the Appellate Tribunal, which reduced the penalty to 50% under Section 27 (4) (i), stating that penalty is imposable for wrongful availment of input tax credit. The appellant challenged this decision in the present appeal.

3. The High Court noted that the appellant had indeed wrongfully availed input tax credit, falling under Section 7 (1) (b) of the Act. The appellant admitted to the wrongful availment and promptly paid the tax demanded. The Court referred to relevant sections of the Act, including Section 7 (1) (a), (b), and Section 7 (2), which govern the payment of tax and entitlement to input tax credit.

4. Section 27 (4) (i) and (ii) provide for the levy of penalties in cases of wrongful availment of input tax credit. The Tribunal correctly modified the penalty imposed by the Assessing Authority, determining it to fall under Section 27 (4) (i) rather than (ii) due to being the first detection of wrongful availment. The Court agreed with the Tribunal's decision, noting that the appellant had the opportunity to show cause against the penalty but did not rebut it.

5. Ultimately, the High Court found no error of law in the Tribunal's decision and dismissed the appeal, stating that there was no substantial question of law to be considered. The Court upheld the penalty imposed under Section 27 (4) (i) and affirmed the Tribunal's ruling. The appeal was deemed devoid of merits, leading to its dismissal along with the connected miscellaneous petition.