2015 (8) TMI 901 - HC - VAT and Sales Tax

Input tax credit Cancellation of Registration certificate of the seller Retrospectively Petitioner/revenue challenging judgment and order of tribunal by which interest demanded and penalty imposed upon assesse was removed Assesse challenges said judgment for entitlement of input tax credit since same was not granted on ground that registration of dealer/seller who had sold goods to assessee was cancelled with retrospective effect Held that - Tribunal had not committed any error in removing interest as well as penalty imposed upon assesse It was undisputed fact that when assessee had purchased goods from dealer/seller, he was registered under provisions of VAT Act and subsequently, his registration was cancelled Therefore assesse cannot be deprived of his right of getting credit of input tax available under provisions of VAT Act Supreme court in State of Maharashtra v. Suresh Trading Company 1996 (2) TMI 451 - SUPREME COURT OF INDIA observed that Whatever may be effect of retrospective cancellation upon selling dealer, it can have no effect upon any person who has acted upon strength of registration certificate when registration was current Hence, cross objections allowed Decided in favour of Assesse.

Summary

Issues:
1. Challenge to judgment and order dated 21.11.2013 passed by the Gujarat Value Added Tax Tribunal.
2. Entitlement for input tax credit due to cancellation of seller's registration.
3. Tribunal's deletion of levy of interest and penalty.
4. Cross objections filed by the assessee regarding benefit entitlement post-seller registration cancellation.

Issue 1: Challenge to Tribunal's Judgment:
The State of Gujarat filed a Tax Appeal against the Gujarat Value Added Tax Tribunal's order dated 21.11.2013. The Tribunal partly allowed the appeal by the assessee, removing the interest demanded and penalty imposed by the Deputy Commissioner of Commercial Tax. The appellant contested this decision, claiming that the assessee should not be entitled to input tax credit due to the cancellation of the seller's registration with retrospective effect.

Issue 2: Entitlement for Input Tax Credit:
The central question raised was whether the Tribunal erred in deleting the levy of interest and penalty solely based on the assessee having excess input credit adjustable against tax demand. The respondent had purchased goods from a seller whose registration was ab initio cancelled, leading to a tax assessment and penalties. The Tribunal partially allowed the appeal, prompting the State to challenge this decision.

Issue 3: Deletion of Levy of Interest and Penalty:
The Tribunal's decision to remove the interest and penalty imposed on the assessee was upheld by the High Court. The Court found no error in the Tribunal's ruling and dismissed the appeal by the State of Gujarat, along with a related Civil Application.

Issue 4: Cross Objections Regarding Benefit Entitlement:
The assessee filed cross objections, arguing that despite the seller's registration cancellation, they should still be entitled to claim benefits. Citing the case of State of Maharashtra v. Suresh Trading Company, the assessee contended that the cancellation of the seller's registration should not affect their entitlement to input tax credit. The High Court agreed with the assessee's argument, allowing the cross objections based on the Supreme Court's decision.

In conclusion, the High Court upheld the Tribunal's decision to delete the levy of interest and penalty on the assessee. Additionally, the Court allowed the cross objections filed by the assessee, confirming their entitlement to claim benefits despite the cancellation of the seller's registration.