2015 (4) TMI 319 - HC - VAT and Sales Tax

Denial of input tax credit - Liability of purchasing dealer - According to the Petitioner, his duty is only to show that the purchaser has paid the tax - Held that - The respondent has filed a counter affidavit and submitted that it is after all a notice and it is for them to produce the purchase tax and admittedly, the Petitioner has not produced the connected documents to prove the tax payments and straightway filed these Writ Petitions and therefore there is no violation of principles of natural justice - Petitioner is directed to produce all the relevant purchase documents for all these matters for verification. If on verification any tax is not paid for the purchase, it is open to the authority to levy the tax and the Petitioner is liable to pay. The Petitioner is directed to treat this as a show-cause notice and directed to give proper explanation to the authorities and on such explanation being made, the authorities are directed to pass appropriate orders on merits and in accordance with law. - Petition disposed of.

Summary

Issues:
Challenge to notice demanding tax payment based on input tax credit reversal.

Analysis:
The judgment revolves around the challenge posed by the Petitioner against a notice requiring tax payment due to the selling dealer's alleged failure to pay taxes, resulting in the reversal of input tax credit. The Petitioner argued that their obligation is solely to demonstrate that the purchaser has paid the tax, and if the selling dealer has paid the tax at the time of purchase, the authorities lack the power to revoke the input tax credit. The Respondent contended that the notice is valid, emphasizing the Petitioner's failure to provide supporting documents to prove tax payments, leading to the filing of the Writ Petitions without adhering to natural justice principles.

The notice in question explicitly stated the amount for which the Petitioner was liable due to the selling dealer's alleged non-payment of taxes. The Petitioner's stance was supported by legal precedent (2013) 60 VST 283(Mad), highlighting the provision that input tax credit can be claimed if the purchasing dealer proves the tax payment on the purchase. The judgment emphasized that the liability for unpaid taxes by the selling dealer should not be imposed on the purchasing dealer who demonstrated payment. The judgment further clarified that the authority's power to revoke input tax credit is limited to cases of incorrect, incomplete, or improper claims, not on the basis of the selling dealer's non-payment.

The judgment concluded by directing the Petitioner to provide all relevant purchase documents for verification. If any tax payment discrepancies are found, the authority is empowered to levy taxes accordingly. The Petitioner was instructed to treat this directive as a show-cause notice, requiring a proper explanation. Subsequent orders were to be passed based on the provided explanation, ensuring compliance with the law. As a result, the Writ Petitions were disposed of without costs, and connected Miscellaneous Petitions were closed.