2016 (12) TMI 886 - HC - VAT and Sales Tax

Restoration of registration - Held that - It is required to be noted that as such the learned Tribunal has not discussed anything with respect to finding recorded by the First Revisional Authority on the genuineness of the transactions of sale and purchase by the respondent and the finding recorded by the First Revisional Authority that the respondent had indulged into billing activities only. No reasons whatsoever have been assigned by the learned Tribunal on the findings recorded by the First Revisional Authority. While passing the impugned order, the learned Tribunal has stated that considering the entire circumstances, the documents and the payment the applicant has made as per our direction, the Tribunal is of the view that the registration of the original applicant is to be restored. The aforesaid can hardly be said to have been given cogent reasons. Even subsequent payment of ITC wrongly claimed and that too before the Tribunal can hardly be a ground to restore the registration. Having found that the assessee / trader has indulged into billing activities only and has wrongly claimed the ITC and thereafter the registration is cancelled, and thereafter before the Tribunal the assessee / trader agrees to deposit the amount of ITC wrongly claimed, the same can hardly be a ground to restore the registration. Necessary consequences of wrong availment of ITC i.e. cancellation of registration shall follow - it is required to be noted that in the present case the respondent had specifically admitted that it was not entitled to ITC of ₹ 4,45,645/and that he wrongly claimed / availed the ITC of ₹ 4,45,645/ - It is required to be noted that the learned Tribunal has not given any specific finding that the Tribunal does not agree with the finding recorded by the First Revisional Authority on the genuineness of the transactions of sale and purchase by the respondent and that the respondent had indulged into billing activities only. Without giving such finding, the learned Tribunal is not justified in directing to restore the registration - Petition allowed - decided against respondent-assessee.

Summary

Issues Involved:
1. Legitimacy of the cancellation of the respondent's registration by the First Revisional Authority.
2. The Tribunal's decision to restore the registration after the respondent paid the wrongly claimed ITC amount.
3. Adequacy of the Tribunal's reasoning in its judgment.

Detailed Analysis:

1. Legitimacy of the Cancellation of Registration:
The respondent's registration was cancelled by the First Revisional Authority on the grounds that the respondent indulged in billing activities only and wrongly claimed Input Tax Credit (ITC) of ?4,45,645. The authority discovered that the respondent had purchased goods from dealers whose registrations were cancelled ab initio and that the transactions were not genuine. Despite multiple notices and opportunities to prove the genuineness of the transactions, the respondent failed to do so. Consequently, the registration was cancelled ab initio.

2. Tribunal's Decision to Restore Registration:
The respondent appealed the cancellation before the Tribunal, expressing willingness to pay the wrongly claimed ITC amount. The Tribunal directed the respondent to deposit ?4,45,645, which was complied with. Subsequently, the Tribunal set aside the cancellation order, citing the payment made by the respondent. The Tribunal did not provide detailed reasons for restoring the registration, other than acknowledging the payment of the wrongly claimed ITC.

3. Adequacy of the Tribunal's Reasoning:
The High Court found that the Tribunal failed to address the findings of the First Revisional Authority regarding the genuineness of the transactions and the respondent's involvement in billing activities. The Tribunal's decision was primarily based on the payment of the wrongly claimed ITC, without discussing the substantive issues raised by the Revisional Authority. The High Court emphasized that subsequent payment of wrongly claimed ITC cannot be a ground to restore registration if the dealer was found to have indulged in fraudulent activities.

Conclusion:
The High Court quashed the Tribunal's judgment and restored the order of the First Revisional Authority canceling the respondent's registration. The Court held that the Tribunal erred in restoring the registration without addressing the findings of fraudulent activities and without providing adequate reasons for its decision. The High Court reiterated that necessary consequences of wrong availment of ITC, such as cancellation of registration, must follow, and mere repayment of the wrongly claimed amount cannot justify restoration of registration.