2015 (7) TMI 1326 - HC - VAT and Sales Tax

Input Tax Credit - credit denied only for the reason that the dealers were not registered - whether Commercial Tax Tribunal was legally justified in granting the benefit of input tax credit to the dealer without verifying the nature of transaction as discussed by the assessing authority as well as by first appellate authority? - HELD THAT - The ground on which the input tax credit was denied is not sustainable and therefore the orders of assessing authority have rightly been set aside. Sri Pandey further argued that in view of Rule 21 (3) of the Rules framed under the U.P. Value Added Tax Act, 2008 the benefit of input tax credit can also be disallowed, if there is no actual sale/purchase of goods - In this regard the assessing authority has not returned any finding. However, a careful perusal of the order of the tribunal reveals that documents were produced before the assessing authority to establish the actual purchase of goods which on verification were found to be correct as per the finding of the tribunal - also the argument that benefit of input tax credit is not admissible as there is no actual sale/purchase of goods is of no substance. The assessee herein are entitle to the benefit of input tax credit in the relevant years and the consequentially the provisions of entry tax would not be attracted - revision dismissed.

Summary

Issues:
Whether assessees are entitled to input tax credit.

Analysis:
The revisions before the High Court involved a dispute regarding the entitlement of input tax credit to the assessees. The assessing authority had initially denied the benefit of input tax credit, but the appellate authority remanded the matter. Subsequently, the tribunal set aside the orders of the appellate authority and extended the benefit of input tax credit to the assessees. The main question of law raised by the revenue in these revisions was whether the tribunal was justified in granting the benefit of input tax credit without verifying the nature of the transaction as discussed by the assessing authority and the first appellate authority.

The basis for denying input tax credit was that the dealers were not registered. However, it was found as a fact that during the relevant period, both the selling and purchasing dealers were duly registered, and all payments were made through banks, which were verified. Additionally, tax invoices supported the entire dealings, confirming that the goods were tax paid. Several revisions with similar controversies had been dismissed previously, reinforcing the sustainability of granting input tax credit. The argument made under Rule 21(3) of the Rules framed under the U.P. Value Added Tax Act, 2008, regarding the disallowance of input tax credit in the absence of actual sale/purchase of goods, was found to be unsubstantial. The tribunal's findings confirmed the actual purchase of goods, rendering the argument invalid.

The imposition of entry tax was contingent upon the denial of input tax credit, which had now been allowed. Consequently, there was no basis for imposing entry tax. The High Court held that the assessees were indeed entitled to the benefit of input tax credit for the relevant years, and as a result, the provisions of entry tax would not be applicable. Ultimately, the revisions lacked merit and were dismissed by the High Court.