2016 (11) TMI 1320 - HC - VAT and Sales Tax

Input tax credit - registration of sellers cancelled - selling dealer not paid taxes - Form-W - whether the purchasing dealers can be held liable for non-payment of tax by the selling dealers on account of retrospective cancellation of their registration certificates? - Held that - this is no longer res intergra as it has been settled by this Court in several decisions. The recent decision on the point is in JINSASAN DISTRIBUTORS v. COMMERCIAL TAX OFFICER (CT), CHINTADRIPET ASSESSMENT CIRCLE,CHENNAI 2013 (4) TMI 615 - MADRAS HIGH COURT relied upon, wherein it was held that Retrospective cancellation of the registration certificate of the selling dealer can have no effect on the person who acted upon the strength of the registration certificate when it was in force. Selling dealer has not paid taxes - Held that - This issue was considered by this Court in the case of SRI VINAYAGA AGENCIES v. ASSISTANT COMMISSIONER (CT), VADAPALANI-I ASSESSMENT CIRCLE, CHENNAI AND ANOTHER 2013 (4) TMI 215 - MADRAS HIGH COURT , where it was held that Sub-section (16) of Section 19 states that the input tax credit availed is provisional. It, however, does not empower the authority to revoke the input tax credit availed on a plea that the selling dealer has not paid the tax. It only relates to incorrect, incomplete or improper claim of input tax credit by the dealer. Belated submission of Form-W - Held that - this Court has taken into consideration the Circular issued by the Commissioner of Commercial Taxes, in Circular No.22/2014 dated 12.05.2014, that even though Statutory Forms such as Form-W are submitted belatedly, that by itself will not be the reason to reject the same. Therefore, to that extent, the respondent was not justified in outrightly rejecting the Form-W, belatedly submitted by the petitioner. Therefore, the matter has to be remanded back to the respondent with a direction to consider Form-W. Petition partly allowed - matter on remand.

Summary

Issues involved: Challenge to assessment orders under TNVAT Act for multiple years; Reversal of Input Tax Credit based on non-payment of taxes by selling dealers; Belated submission of Form-W.

Analysis:

1. Challenge to Assessment Orders:
The petitioner, a dealer in Chilly, Cardamom, and Turmeric registered under TNVAT Act, challenged assessment orders for the years 2009-2013. The challenge focused on two main issues: the reversal of Input Tax Credit due to non-payment of taxes by selling dealers and the belated submission of Form-W. The petitioner agreed to pay taxes on other issues raised in the assessment orders, leaving the court to consider only the two issues mentioned.

2. Reversal of Input Tax Credit - Non-payment by Selling Dealers:
Regarding the first issue, the court referred to previous decisions, notably the case of JINSASAN DISTRIBUTORS v. COMMERCIAL TAX OFFICER, which established that purchasing dealers cannot be held liable for the non-payment of taxes by selling dealers due to retrospective cancellation of their registration certificates. The court emphasized that as long as the purchasing dealers paid taxes based on valid invoices from registered dealers, the retrospective cancellation of registration certificates of selling dealers does not nullify the Input Tax Credit availed by the purchasing dealers. This principle was reiterated in subsequent cases, leading to the quashing of the impugned orders related to this issue.

3. Reversal of Input Tax Credit - Non-payment by Selling Dealers (Contd.):
Further, the court addressed the issue of reversal of Input Tax Credit based on the non-payment of taxes by selling dealers, citing the case of SRI VINAYAGA AGENCIES v. ASSISTANT COMMISSIONER. The court held that if a dealer had paid taxes to the selling dealer and followed the prescribed rules, the Input Tax Credit could not be reversed solely based on the failure of the selling dealer to pay taxes. The liability for non-payment was to be imposed on the selling dealer, not the purchasing dealer who had proof of tax payment on purchases. Consequently, the court set aside the impugned orders related to this issue as well.

4. Belated Submission of Form-W:
Regarding the belated submission of Form-W, the court considered a Circular issued by the Commissioner of Commercial Taxes, stating that the late submission of statutory forms should not be a reason for rejection. Consequently, the court found the respondent unjustified in outrightly rejecting the belatedly submitted Form-W. The matter was remanded back to the respondent for fresh consideration, taking into account the Circular and relevant cases.

5. Conclusion:
In conclusion, the court partly allowed the Writ Petitions, quashing the impugned orders related to the reversal of Input Tax Credit and the rejection of Form-W due to belated submission. The court directed the petitioner to pay taxes as demanded on other issues not challenged. No costs were awarded, and the connected Miscellaneous Petition was closed.