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2016 (1) TMI 329 - HC - VAT and Sales TaxReversal of Input Tax credit - levy of penalty under Section 27(3) of the TNVAT Act - Held that - At the time of purchasing the goods admittedly the petitioner has paid the tax to the seller which is not under dispute. The reason assigned in the impugned order is that the petitioner firm is denied Input Tax Credit just because the dealer/seller has failed to report the same before the respondents. The reason adduced by the respondent is unacceptable for the reason that when admittedly the petitioner firm has paid the tax he cannot be made liable for the failure on the part of the seller to report the same to the respondent. - Decided in favour of assessee.
Issues:
1. Validity of the assessment order passed by the second respondent under the Tamil Nadu Value Added Tax Act. 2. Allegation of non-payment of tax by other end dealers leading to reversal of Input Tax Credit and imposition of penalty. 3. Rejection of objections filed by the petitioner against the assessment order. 4. Burden of proof on the petitioner firm as per Section 17 of the TNVAT Act. 5. Requirement of producing annexure-II by the petitioner. 6. Entitlement of the petitioner firm to avail tax credit without appealing before the Appellate Deputy Commissioner. Analysis: 1. The petitioner firm, engaged in the textile business, challenged the assessment order passed by the second respondent for the assessment year 2013-2014. The petitioner contended that they had duly reported their turnover and paid taxes, adjusting legitimate dues from Input Tax Credit. The second respondent, however, alleged non-payment of tax by other dealers and proposed to reverse Input Tax Credit, leading to the issuance of the impugned assessment order on 10.08.2015. 2. Despite the petitioner's explanations and submission of supporting documents, the second respondent upheld the assessment order, prompting the petitioner to file a Writ Petition seeking to quash the order. The petitioner argued that they cannot be held liable for the non-payment of tax by other dealers, citing previous judgments where similar prayers were entertained and allowed by the Court. 3. The Government Advocate contended that the burden of proof lay on the petitioner to produce annexure-II as required by the Department. Additionally, it was argued that the petitioner's failure to appeal before the Appellate Deputy Commissioner rendered them ineligible to avail the tax credit, as per Section 17 of the TNVAT Act. 4. The Court, after considering the submissions from both sides and examining the records, found that the petitioner had indeed paid taxes to the seller at the time of purchase. The Court rejected the respondent's reasoning that the petitioner was denied Input Tax Credit due to the seller's failure to report tax payments. The Court cited the case of Sri Vinayaga Agencies, emphasizing that the Input Tax Credit availed is provisional and cannot be revoked based on the selling dealer's non-payment of tax. 5. Relying on the precedent set by previous judgments, the Court allowed the Writ Petition, setting aside the impugned assessment order. The Court reiterated that the department should pursue recovery of tax from the selling dealer rather than penalizing the petitioner for the seller's non-compliance. The Writ Petition was allowed, with no costs imposed, and the connected miscellaneous petition was closed.
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