2015 (4) TMI 610 - HC - VAT and Sales Tax

Reversal of Input tax credit - variation with references to purchases made - supplier has not paid the tax collected by them - Held that - the selling dealer had not paid the collected tax. The liability had to be fastened on the selling dealer and not on the petitioner-dealer which had shown proof of payment of tax on purchases made. The orders were liable to be set aside. That sub-section (16) of section 19 states that the input-tax credit availed is provisional. It however, does not empower the authority to revoke the input-tax credit availed of on a plea that the selling dealer has nor paid the tax. Additional Government Pleader (Taxes) appearing for the respondent is unable to refute the factual legal submissions. Hence, I have no other option except to set aside the impugned orders and remit the matters back to the authority concerned to consider the case of the petitioner afresh on merits. - Matter remanded back - Decided in favour of assessee.

Summary

Issues: Challenge to orders proposing to reverse Input Tax Credit (ITC) based on discrepancies in purchases made from other dealers and monthly returns.

Analysis:
1. The petitioner challenged the respondent's orders dated 02.03.2015 proposing to reverse Input Tax Credit (ITC) due to discrepancies in purchases made from other dealers and monthly returns. The petitioner argued that detailed replies were provided, but the respondent confirmed the proposal. The petitioner contended that the reasons for denial were unfounded as the excess input tax credit was due to the sellers reporting less sales, not the petitioner's fault.

2. The petitioner emphasized that all vendors were registered dealers with the department, and action should have been taken against them for not remitting the tax collected. Citing the case of Althaf Shoes (P) Ltd., the petitioner argued that the department cannot deny the claim without addressing the vendor's non-compliance. Additionally, the petitioner relied on the case of Sri Vinayaga Agencies, stating that input-tax credit can be claimed if the tax on purchases has been paid, even if the selling dealer failed to remit the tax.

3. The Court referred to previous decisions highlighting that as long as the purchasing dealer complies with requirements, the claim cannot be denied. The Court emphasized that the burden is on the department to take action against vendors who do not remit taxes. The respondent's observation was deemed unsustainable, and the orders proposing to reverse ITC were set aside.

4. The Court directed the authority to reconsider the petitioner's case on merits and in accordance with the law. The petitioner was instructed to provide necessary documents attested by the seller for further review. If the petitioner failed to comply by the specified date, the authority was empowered to pass orders independently. The writ petitions were disposed of with these directions, and no costs were awarded.