2016 (6) TMI 749 - HC - VAT and Sales Tax

Validity of revision assessment - input tax credit - scope of the SCN - genuineness of the purchases - movement of goods - Held that - With regard to the averment that the proof for movement of goods has not been produced, it has to be pointed out that this was never the stand of the department in the show cause notice. At no point of time, the petitioner was called upon to produce any documents to prove the movement of goods. Therefore, the respondent has passed the impugned order giving reasons which were not the basis on which show cause notice was issued. Hence, this amounts to clear violation of principles of natural justice. That apart, the respondent has not considered the specific case of the petitioner that some of their sellers have filed monthly VAT returns along with Annexure-II manually and others have filed electronically. The petitioners had further stated that on their own volition, they made verification and it was found that the alleged difference in tax was reduced. This aspect of the matter was also not considered by the respondent. - the finding recorded by the respondent with regard to the difference in claim of ITC set aside - remanded back for passing speaking order. - Decided partly in favor of petitioner.

Summary

Issues:
Challenge to revision of assessment passed by the respondent for six years based on the difference between input tax credit claim and tax paid by petitioner's sellers.

Analysis:
The petitioner, a Private Limited Company, challenged the revision of assessment passed by the respondent for six years, focusing on the difference between the input tax credit claim and the tax paid by the petitioner's sellers. The petitioner, engaged in manufacturing finished leather, leather products, and shoes, conducted local sales, inter-state sales, and exports. The audit conducted at the petitioner's business premises led to the issuance of notices by the respondent for all six assessment years. The notices highlighted discrepancies, particularly the difference in input tax credit claim and tax paid by the petitioner's sellers. The petitioner, in response, requested dealer-wise turnover details to prepare a reply, emphasizing the need for time to submit a comprehensive response.

Upon receiving the dealer-wise turnover details, the petitioner pointed out discrepancies in the web reports provided by the respondent. The petitioner highlighted issues with electronically filed Annexures II not being reflected on the website for certain years. The petitioner diligently collected and submitted Annexures II filed manually by sellers for verification. The petitioner reduced the claimed difference in input tax credit for the year 2010-11 after thorough verification and cited a relevant court decision to support their case.

Despite the petitioner's efforts to rectify discrepancies and provide necessary documentation, the respondent passed the impugned order of revision for all six years, mainly focusing on the difference in input tax credit claims. The respondent's order lacked specific reasoning to reject the petitioner's claims and erroneously referenced a court decision that was irrelevant to the case at hand. The respondent failed to consider the petitioner's explanations regarding manual and electronic filing of Annexures II by sellers, and overlooked the petitioner's efforts to verify and reduce the alleged tax difference.

In light of these shortcomings, the Court found the respondent's order to be in violation of principles of natural justice. The Court emphasized that the respondent did not address crucial aspects raised by the petitioner, including the method of filing Annexures II and the reduction of claimed differences through verification. Consequently, the Court partially allowed the Writ Petitions, setting aside the finding on the difference in input tax credit claims and remanding the matter to the respondent for fresh consideration. The Court directed the respondent to issue notices to the petitioner, provide an opportunity for a personal hearing, and examine all records before issuing a new order in accordance with the law. The Court also instructed the respondent to furnish specific invoice numbers related to the claimed differences to facilitate the fresh consideration.