2016 (8) TMI 132 - HC - VAT and Sales Tax

Input tax credit - revision of the assessment orders - other end dealers not reported their sales turnover - Held that - So far as the issue relating to reversal of input tax credit under Section 19(15) of the Act is concerned on the ground that the registration certificates of the dealers, from whom the petitioner purchased goods, have been cancelled, they are held to be not a ground to reversal of input tax credit of the purchasing dealer - Therefore, the proposal made by the respondent to reverse the input tax credit under Section 19(15) of the Act is not tenable. The other issue is with regard to reversal of input tax credit under Section 27(2) of the said Act stating that the other end dealers have not reported sales turnover. Even in this regard, there is no discussion as to how such an issue was taken up by the respondent for consideration and there is no material borne out even in the show cause notices. Therefore, the proposal to reverse the input tax credit under Section 27(2) of the said Act is also erroneous and not sustainable. With regard to levy of penalty, admittedly there is no allegation that there is any escapement of taxable turnover and when the books were accepted by the Authority, the question of levy of penalty does not arise. Decided in favor of asessee.

Summary

Issues:
Challenge to assessment orders for multiple years under Tamil Nadu Value Added Tax Act and Central Sales Tax Act; Reversal of input tax credit under Section 19(15) and Section 27(2) of the Act; Proposal to levy penalty under Section 27(4) of the Act.

Analysis:
The petitioner, a registered dealer under the Acts, contested assessment orders from 2009-10 to 2014-15. The respondent issued show cause notices proposing to revise turnover based on input tax credit reversals and unreported sales turnovers. The petitioner objected, citing legal precedents. However, the respondent's orders lacked discussion on objections and legal references, indicating arbitrariness and neglect of duty, as orders must stand on their own.

Regarding the reversal of input tax credit under Section 19(15), the Court referenced past cases where cancellation of vendors' registration certificates did not warrant reversal of input tax credit for purchasing dealers. The Court emphasized that as long as purchasing dealers complied with requirements, the Revenue could not deny claims without taking action against vendors.

Similarly, the proposal to reverse input tax credit under Section 27(2) was found erroneous due to lack of discussion and supporting evidence in the show cause notices. The Court highlighted the necessity for proper justification and factual basis for such actions.

Concerning the levy of penalty under Section 27(4), the Court referred to a Supreme Court decision emphasizing that penalty cannot be imposed without evidence of taxable turnover escapement. Since the Authority accepted the books, penalty imposition was unwarranted.

Consequently, the Court deemed the impugned orders unsustainable and set them aside. The matters were remitted back to the respondent for fresh consideration, directing a reasoned decision based on the petitioner's objections and legal references. The Court closed the case without costs, ensuring a fair and lawful review process.