2015 (6) TMI 1201 - HC - VAT and Sales Tax

Reversal of ITC - the registration certificates of the sellers have been cancelled - TNVAT Act - HELD THAT - When the purchases of goods from the these dealers were duly entered and reflected in the accounts and monthly returns filed, giving details of purchasers including the registration particulars, commodity code, value, rate of tax, amount of VAT and category of goods in the Annexure I of the said returns, the respondent, in the impugned orders, have not mentioned anywhere that the purchases of goods from the above dealers are doubtful or incorrect. That apart, the foundation upon which the respondent has passed the impugned orders clearly shows the reason that the certificates of registration of the dealers have been cancelled, reversal of ITC has to be effected against the petitioner. The said approach adopted by the Assessing Officer is contrary to the settled legal position - the impugned orders are liable to be set aside and accordingly, the same are set aside. Petition allowed.

Summary

Issues:
Challenging impugned proceedings of Assistant Commissioner, Reversal of Input Tax Credit (ITC) claimed by registered dealer, Illegal orders passed without opportunity to petitioner, Reversal of ITC based on cancelled registration certificates of sellers, Contrary grounds for passing impugned orders, Settled legal position on revoking ITC.

Analysis:
The case involved two writ petitions filed by a company challenging the Assistant Commissioner's proceedings regarding the reversal of Input Tax Credit (ITC) claimed by the petitioner. The petitioner, a registered dealer, contended that the orders were illegal and contrary to the law. The petitioner had filed objections against the proposed reversal of ITC, citing that it was not open for the respondent to reverse ITC based on the cancellation of sellers' registration certificates. The petitioner had also provided details of purchases made from registered dealers in their objections.

The petitioner argued that the respondent had passed orders without affording an opportunity to the petitioner and had reversed ITC based on the cancellation of sellers' registration certificates. The petitioner relied on previous judgments to support their case, emphasizing that the Assessing Officer did not have the power to revoke ITC based on such grounds. The petitioner's objections and additional replies were not considered by the respondent before passing the impugned orders.

The High Court analyzed the submissions and materials on record. It noted that the respondent's approach of reversing ITC based on cancelled registration certificates was contrary to the settled legal position. The Court referred to a previous judgment where it was held that revoking ITC based on the selling dealer's tax payment status was incorrect unless there was an incorrect claim of ITC by the dealer. The Court set aside the impugned orders, stating that the Department could proceed against the dealers if necessary. The writ petitions were allowed, and no costs were awarded.