2016 (8) TMI 803 - HC - VAT and Sales Tax

Assessment order - Revision of input tax credit purchase from registration cancelled dealers TNVAT - Held that - Whatever benefits that has accrued to the petitioners based on valid documents in the course of sale and purchase of goods, for which tax has been paid cannot be declined. The transaction that took place when the registration certificates of the selling dealer were in force cannot be denied to the petitioners/assesses. The notices, revised assessment orders and the provisional assessment order, insofar as it seeks to deny the benefit of input tax credit to the petitioners/assessees only on the ground that the registration certificates of the selling dealers have been cancelled with retrospective effect, are set aside writ petition allowed decided in favor of appellant.

Summary

Issues:
Challenge to revised assessment orders under TNVAT Act for the assessment years 2007-08 to 2009-10 based on purchases from registration cancelled dealers.

Analysis:
The petitioner, a registered dealer under the TNVAT Act and the CST Act, contested the revised assessment orders due to purchases from registration cancelled dealers. The key contention was the denial of input tax credit (ITC) based on the cancellation of registration certificates of the selling dealers with retrospective effect. The court referred to a similar case where the Supreme Court held that retrospective cancellation of a registration certificate does not affect those who acted upon it when valid. The court emphasized that benefits accrued based on valid documents during transactions cannot be denied, as it goes against the law established by the Supreme Court.

The court highlighted that the duty cannot be imposed on individuals dealing with registered dealers to verify the validity of registration certificates. It reiterated that a purchasing dealer is entitled to rely on the registration certificate of the selling dealer and act upon it, regardless of any subsequent cancellation. The court emphasized that reversing input tax credit based on retrospective cancellation of registration certificates is unjustifiable. Consequently, the court set aside the notices, revised assessment orders, and provisional assessment order that sought to deny the benefit of input tax credit due to the cancellation of registration certificates with retrospective effect.

In conclusion, the court allowed the writ petitions, quashed the impugned orders, and closed the connected miscellaneous petitions. The judgment reaffirmed the principle that transactions conducted when registration certificates were valid cannot be invalidated due to subsequent cancellations. The decision provided clarity on the entitlement of purchasing dealers to rely on valid registration certificates during transactions, emphasizing the importance of upholding legal rights in such scenarios.