2015 (8) TMI 1132 - HC - VAT and Sales Tax

Adjustment of tax liability Out of input tax credit available Appeal was filed before Tribunal against order of first Appellate Authority dismissing appeal on ground of non-deposit of pre-deposit Tribunal after deciding issue on merits deleted levy of interest and penalty Whether tribunal was justified on deciding matter on merits despite that appellate authority dismissed only on ground of pre-deposit and deleting interest and penalty levied Held that, when appeal before Tribunal was against order of Appellate Authority dismissing appeal on ground of non-deposit of pre-deposit, Tribunal need not and/or should not enter into merits of case Tribunal was required to concentrate on order passed by Appellate Authority dismissing appeal on ground of pre-deposit and/or amount of pre-deposit only However, when main issue involved was of deletion of interest and penalty levied, therefore court inclined to consider issue on merits rather than remanding matter as no fruitful purpose would be served As per decision of Cosmos International Ltd 2015 (4) TMI 779 - GUJARAT HIGH COURT dealer can adjust current year tax liability out of Input Tax Credit available in credit of dealer In view of said decision, no substantial questions of law arises Therefore, Tribunal rightly deleted interest and penalty Decided against Revenue.

Summary

Issues Involved:
1. Whether the Tribunal erred in adjudicating on merits despite the first appellate authority dismissing the appeal only on the ground of pre-deposit.
2. Whether the Tribunal erred in deleting the levy of interest and penalty.

Detailed Analysis:

Issue 1: Tribunal's Adjudication on Merits Despite Dismissal by First Appellate Authority on Pre-Deposit Grounds
The Revenue's main contention was that the Tribunal should not have entered into the merits of the case as the first appellate authority had dismissed the appeal solely on the grounds of non-deposit of the pre-deposit amount. The appellant cited various decisions of the High Court which state that when an appeal is dismissed by the first appellate authority on the ground of non-deposit, the Tribunal should focus solely on the issue of pre-deposit and not delve into the merits of the case. The appellant requested the impugned order to be quashed and the matter to be remanded either to the Tribunal or the first appellate authority.

However, the court noted that the main issue involved was already covered by a decision of the Division Bench in the case of Cosmos International Ltd. v. State of Gujarat. Given this context, the court decided to consider the issue on merits rather than remanding the matter, as no fruitful purpose would be served by remanding it. This decision was made in the peculiar facts and circumstances of the case and was not intended to set a precedent.

Issue 2: Deletion of Levy of Interest and Penalty
The second substantial question of law was whether the Tribunal erred in deleting the levy of interest and penalty. The court observed that this issue was squarely covered against the Revenue by the decision of the Division Bench in the Cosmos International Ltd. case. The Division Bench had confirmed the Tribunal's decision that a dealer is entitled to adjust the tax liability out of the Input Tax Credit (ITC) available in their credit for the current year.

The relevant provisions of the Gujarat Value Added Tax Act and Rules, 2006, particularly Sections 11, 12, 13, and Rules 15 and 18, were considered. The court noted that once the ITC is assessed and determined, the dealer is entitled to adjust this credit against their output tax liability for the current year. If the ITC exceeds the output tax liability, the remaining credit can be carried forward to the next year.

The court dismissed the argument that claiming more ITC than admissible in Form No.108 indicated malafide intention. It held that the final amount of ITC is determined only after assessment, and the dealer is entitled to adjust this assessed ITC against their current year's output tax liability. The Tribunal had rightly observed that the dealer is liable to pay interest only on the balance due amount after adjusting the admissible ITC.

In conclusion, the court found no substantial questions of law arising from the appellant-State's proposal. The Tribunal's decision to allow the dealer to adjust the tax liability with the ITC available in their credit was upheld. Consequently, the deletion of interest and penalty by the Tribunal was also upheld.

Final Order:
The tax appeal was dismissed with no costs. The civil application was also disposed of in light of the dismissal of the tax appeal.