2016 (3) TMI 839 - HC - VAT and Sales Tax

Constitutionality of vires of Section 22(12)(db) of the West Bengal Value Added Tax Act, 2003 on the ground it obliges a dealer or an exporter to do something which may be beyond the capabilities of such dealer or exporter - Denial of refund of input tax credit on account of an export - Export of finished leather products - Held that - the Special Commissioner rejected the claim of refund on the ground that the persons from whom Eco Tanners claimed to have purchased the goods may not have existed. However, the relevant provision under Section 22 (12)(db) does not oblige a dealer or an exporter seeking input tax credit thereunder to take any responsibility for his seller s sellers. As far as the perceived fictitious addresses of Leather Enterprise and Eco Tanners are concerned and they are alleged to be non-existent, the Special Commissioner cannot be heard to refer to such matters when the official website of the department indicates even this moment that such registered dealers enjoy valid registration and continue to function. Therefore, the Special Commissioner order is set aside as it took irrelevant considerations in to account in passing the order - Matter remanded back

Summary

Issues:
Challenge to the vires of Section 22(12)(db) of the West Bengal Value Added Tax Act, 2003 regarding denial of refund on export transaction.

Analysis:
The petitioner contested the constitutionality of Section 22(12)(db) of the Act, arguing that it imposes obligations on dealers or exporters beyond their capabilities. This provision disallows input tax credit for purchases made from a registered dealer found not to exist at the disclosed address during the sale or registration. However, it does not extend to the dealer's suppliers. In this case, the petitioner sought a refund exceeding Rs. 1 crore for exporting leather products purchased from Leather Enterprise and Eco Tanners, both registered dealers as per the Directorate of Commercial Taxes.

The Special Commissioner's order dated August 19, 2015, denied the refund, citing non-existence of entities from which Eco Tanners sourced goods and discrepancies in Leather Enterprise's address. The Court found the Special Commissioner considered irrelevant factors, leading to an unsustainable decision. Consequently, the order was set aside, directing the Special Commissioner to reevaluate the matter within four weeks. The Court refrained from addressing the vires of Section 22(12)(db) in this judgment, leaving it open for future consideration.

Overall, the Court allowed the petition, emphasizing the importance of adhering to applicable provisions and ensuring reasoned orders. The decision highlighted the need for proper adjudication based on relevant considerations, urging the Special Commissioner to conduct a thorough review. No costs were awarded, and certified copies of the order were to be provided to the parties upon request.