2018 (10) TMI 1771 - HC - VAT and Sales Tax

Cancellation of registration of dealers - Benefit of ITC denied - denial of ITC merely because the registration certificate of the selling dealers may have been suspended and later cancelled - HELD THAT - While on one hand the impugned order cannot be sustained as that factual premise for the same with respect to the date of suspension of the registration certificate of the selling dealers does not exist at the same time, it has to be left open to the Assessing Authority to pass appropriate assessment order in accordance with law in the light of directions issued by the First Appeal Authority by his order dated 31.08.2015. The impugned order of the Tribunal is set aside and the matter is remanded to the Assessing Authority to pass fresh order - revision allowed by way of remand.

Issues:
- Disallowance of Input Tax Credit (ITC) claimed against purchases of iron and steel from registered dealers.
- Validity of registration certificates of selling dealers.
- Failure of Assessing Authority to conduct inquiries as directed by the First Appeal Authority.
- Dispute over the date of suspension and cancellation of registration certificates.
- Adjudication of entitlement to ITC benefits.

Issue 1: Disallowance of Input Tax Credit (ITC) claimed against purchases of iron and steel from registered dealers:
The Tribunal rejected the appeal filed by the assessee, upholding the disallowance of ITC claimed against purchases from two registered dealers. The assessee contended that the purchases were made against valid tax invoices and form 21, thus entitling them to ITC benefits. The First Appeal Authority initially allowed the appeal, setting aside the assessment order and remanding the matter for further inquiries. However, the Assessing Officer later rejected the ITC claim, citing the suspension and subsequent cancellation of the dealers' registration certificates. This led to the assessee challenging the decision through appeals to higher authorities.

Issue 2: Validity of registration certificates of selling dealers:
The Assessing Officer based the disallowance of ITC on the grounds of the selling dealers' suspended and cancelled registration certificates. The subsequent revelation through a supplementary affidavit indicated discrepancies in the dates of suspension and cancellation, prompting a reevaluation of the factual basis of the assessment order. The admission by the department that the registration certificates were valid during the relevant purchase period undermined the foundation of the Assessing Officer's decision, necessitating further inquiry.

Issue 3: Failure of Assessing Authority to conduct inquiries as directed by the First Appeal Authority:
The Assessing Authority failed to conduct the necessary inquiries as directed by the First Appeal Authority in the initial order dated 31.08.2015. This failure to adhere to the prescribed investigative steps contributed to the erroneous disallowance of ITC benefits based on incorrect premises regarding the status of the dealers' registration certificates.

Issue 4: Dispute over the date of suspension and cancellation of registration certificates:
The discrepancy in the dates of suspension and cancellation of the registration certificates of the selling dealers played a crucial role in challenging the disallowance of ITC benefits. The subsequent clarification through the supplementary affidavit and confirmation by the Standing Counsel highlighted the importance of accurate and verified information in tax assessment proceedings.

Issue 5: Adjudication of entitlement to ITC benefits:
The conflicting interpretations regarding the entitlement of the assessee to ITC benefits underscored the need for a comprehensive assessment based on verified facts and compliance with legal directives. The judgment emphasized the importance of allowing the Assessing Authority to reevaluate the matter in light of corrected information and the directions issued by the First Appeal Authority.

In conclusion, the High Court set aside the Tribunal's order and remanded the matter to the Assessing Authority for a fresh assessment, emphasizing the need for proper inquiries and compliance with legal procedures to determine the assessee's entitlement to Input Tax Credit benefits accurately.

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