2016 (7) TMI 281 - HC - VAT and Sales Tax

Input tax credit - Penultimate sake in the course of export - It was observed by the appellate authority that, the sales effected by the petitioners are not zero rated sales falling under Section 18(1) of the TNVAT Act, 2006 and they are not eligible for ITC or refund of the tax paid on the purchase of goods including the capital goods. Further, it was pointed out that they have not produced form H to establish their case. Held that - It is seen that while submitting the objections to the pre-assesment notice, the petitioner in their letter dated 17.03.2016 had requested for personal hearing in the subject column itself, though not in the body of the letter. Therefore, the respondent ought to have afforded an opportunity of personal hearing to the petitioner and thereafter, proceed to complete the assessment. - In the light of the above, the writ petition is allowed and the impugned order is set aside. - Matter remanded back. - Decided in favor of assessee.

Summary

Issues:
Challenge to order of assessment reversing input tax credit and imposing penalty under VAT Act, 2006 for sales to 100% Export Oriented Units.

Analysis:

1. Issue of Assessment Reversing Input Tax Credit:
The petitioner, a registered dealer under the VAT Act, challenged an assessment order reversing input tax credit and imposing a penalty. The pre-assessment notice alleged that the petitioner's sales to Export Oriented Units did not qualify as the last sale under Section 5(3) of the CST Act, 1956, as they failed to produce form H. The petitioner contended that their sales were indeed the last sale before export, citing relevant case law. The court emphasized the need for the assessing officer to determine if the petitioner's sales were the last sale preceding export. The petitioner had requested a personal hearing, which the respondent failed to provide, leading to the order being set aside for fresh consideration with a directive for a personal hearing and a speaking order.

2. Penalty Imposition under VAT Act, 2006:
In addition to reversing input tax credit, the respondent proposed to levy a penalty under Sec.27(3)/27(4) of the TNVAT Act. The petitioner's objections, referencing previous appeals and relevant case law, were not adequately considered by the assessing officer. The court highlighted the importance of establishing whether the sales to Export Oriented Units qualified as zero-rated sales under Section 18(1) of the TNVAT Act, emphasizing the need for the petitioner to produce necessary records and form H. The court's decision to set aside the order for fresh consideration also extends to the penalty imposition, requiring a comprehensive review by the respondent after affording the petitioner a personal hearing.

In conclusion, the High Court of Madras allowed the writ petition, setting aside the impugned assessment order and remanding the matter to the respondent for a fresh consideration. The court directed the respondent to provide the petitioner with a personal hearing, review any documents produced, and issue a speaking order promptly. The decision underscores the importance of due process and proper assessment in matters of input tax credit reversal and penalty imposition under the VAT Act, 2006, ensuring fair treatment and adherence to legal provisions.