2016 (7) TMI 1192 - HC - VAT and Sales Tax

Reversal of Input Tax Credit (ITC) on account of cross verification of Annexure I of the buyer with that of Annexure - II of the seller - levy of tax on intellectual property purchased and used - Held that - the respondent was required to examine that the said issue, peruse the business transfer agreement and if necessary call for other records to find out as to whether it was the case of transfer of business as a whole. However, on a perusal of the impugned proceedings, it is evidently clear that such exercise has not been done. Therefore, the necessarily the finding recorded by the respondent so far as the finding in D.No.3 requires to be set aside and remanded for fresh consideration. With regard to finding in D.No.2 is concerned, once again it appears that there was no sufficient opportunity granted to the petitioner, since after the receipt of the notice dated 29.01.2016 the petitioner sought for time atleast of 15 days and this has not been either accepted or rejected. - Therefore, the finding rendered in D.No.2 of the impugned order also calls for interference and remitted for fresh consideration. Order set aside - Matter remanded back.

Summary

Issues Involved:
Challenge to the revision of assessment for the year 2011-2012 under the Tamil Nadu Value Added Tax Act, 2006 based on the reversal of Input Tax Credit (ITC) and levy of tax on intellectual property purchased and used.

Analysis:

Issue 1: Reversal of ITC on account of cross verification of Annexure I and Annexure II:
The petitioner challenged the reversal of ITC amounting to ?94,03,130 due to the non-production of bills for a turnover of ?25,65,486, resulting in a tax implication of ?10,300. The petitioner sought to drop the proceedings by citing relevant case laws such as Sri Vinayaga Agencies and Infinity Wholesale Ltd. The petitioner requested an opportunity to produce the purchase invoices, highlighting the need for a fair hearing and consideration of their submissions.

Issue 2: Levy of tax on intellectual property purchased and used:
The Assessing Authority proposed taxing the purchase turnover of Goodwill and Intellectual property at 4% under Section 12 of the Act. The petitioner argued that the purchase of Goodwill and Intellectual property was made without payment of tax and contended that these assets were not consumed or used in manufacturing activities. They referenced legal precedents like Rustom Cavasjee Cooper v. Union of India to support their argument that a business is not considered goods. The petitioner requested the authority to drop further proceedings based on the show cause notice.

Judgment:
The High Court found that the respondent did not adequately consider the petitioner's submissions and legal references while making decisions on the issues of ITC reversal and tax on intellectual property. As a result, the Court set aside the findings on these two issues and remanded the matter to the respondent for fresh hearing and disposal. The Court directed the respondent to provide the petitioner with a personal hearing, allowing them to present all relevant documents. The petitioner was instructed to take a fresh decision on merits and in accordance with the law. The Court also noted that the petitioner could explore further remedies available under the Act for other issues mentioned in the impugned order. No costs were awarded, and the connected Miscellaneous Petitions were closed.