2015 (8) TMI 348 - HC - VAT and Sales Tax

Reversal of input tax credit - Held that - Court in the aforementioned Judgment viz., Sri Vinayaga Agencies vs. The Assistant Commissioner (CT) (2013 (4) TMI 215 - MADRAS HIGH COURT), has clearly and categorically held that the ITC claimed by the dealers cannot be reversed under Section 19(1) of TNVAT Act on the ground that the sellers have not paid the tax to the department, the writ petition is allowed and the impugned order is set aside - Decided in favour of assessee.

Summary

Issues: Challenge to impugned proceedings of Commercial Tax Officer regarding Input Tax Credit reversal based on non-payment of tax by selling dealers.

Analysis:
1. Issue of Input Tax Credit Reversal: The petitioner challenged the Commercial Tax Officer's decision to reverse Input Tax Credit (ITC) amounting to Rs. 13,08,993 on the grounds that the selling dealers did not pay tax to the department. The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, claimed ITC for purchases made from a registered dealer, Tvl. Hindustan Unilever Limited, Tamil Nadu. The petitioner filed monthly returns for the year 2007-2008, availing ITC under Section 19 of the TNVAT Act. The original assessment order allowed the ITC claimed by the petitioner. However, after more than five years, the respondent issued a notice alleging non-payment of tax by the selling dealers, leading to the reversal of ITC claimed by the petitioner.

2. Contentions of the Petitioner: The petitioner contended that they had disclosed all purchases and provided tax invoices from the selling dealer to the respondent. The petitioner argued that as per a previous judgment of the court, ITC claimed by dealers cannot be reversed under Section 19(1) of the TNVAT Act based on non-payment of tax by the selling dealers. The petitioner emphasized that the respondent's decision to reverse the ITC was unjustified and should be set aside.

3. Government's Response: The Government Advocate representing the respondent acknowledged the precedent set by a previous judgment of the court in a similar case. The Government Advocate mentioned that a writ appeal had been filed against the said judgment, which was pending consideration. However, based on the established legal principle that ITC cannot be reversed due to non-payment of tax by selling dealers, the Government Advocate agreed with the petitioner's stance.

4. Court's Decision: The court referred to the previous judgment in the case of Sri Vinayaga Agencies vs. The Assistant Commissioner, where it was held that ITC claimed by dealers cannot be reversed under Section 19(1) of the TNVAT Act if selling dealers have not paid tax to the department. In line with this legal position, the court allowed the writ petition, setting aside the impugned order of the Commercial Tax Officer. The court also noted that the respondent could take action against the selling dealers if deemed necessary. The judgment concluded by stating that there were no costs involved, and the connected miscellaneous petition was closed.