2017 (1) TMI 333 - HC - VAT and Sales Tax

Input tax credit - denial on the ground that the selling dealer has not paid the tax - Held that - Once the purchaser dealer-assessee satisfactorily demonstrates that while purchasing goods, he has paid the amount of VAT to the selling dealer, the matter should end so far as his entitlement to the claim input tax credit - If the selling dealer has not deposited the amount in full or a part thereof, it would be for the Revenue to proceed against the selling dealer. But thereby the benefit of input tax credit cannot be deprived to the purchaser dealer. Petition dismissed - decided in favor of respondent-assessee.

Summary

Issues:
Challenge to the order of the Karnataka Appellate Tribunal allowing input tax credit claim. Questions raised regarding the Tribunal's decision and burden of proof on the assessee. Examination of whether the selling dealer's VAT deposit affects the purchaser's entitlement to input tax credit.

Analysis:
The High Court addressed the delay in filing the petition seeking condonation of a 22-day delay, opting to consider the merits of the petitions due to the facts and circumstances. The petitions challenged the Karnataka Appellate Tribunal's order granting input tax credit to the assessee as a purchaser dealer. The State raised questions of law regarding the Tribunal's decision, specifically questioning the allowance of the appeals and the application of Section 70 of the KVAT Act. The High Court noted that the formulated questions did not warrant consideration, suggesting the key question was whether the Tribunal's finding on the burden of proof by the assessee was perverse to the record.

The Court considered the evidence presented by the appellant, including tax invoices, stock registers, bank statements, and other documents to support the input tax credit claim. The Tribunal found that the appellant had fully discharged the burden of proof, supporting the claim with payment and goods movement proof. The Court upheld the Tribunal's finding, stating that the evidence presented did not indicate perversity. The Court emphasized that questions regarding re-appreciation of evidence would constitute questions of fact, not law.

Regarding the selling dealer's VAT deposit, the Court clarified that if the purchaser dealer demonstrates payment of VAT to the selling dealer, their entitlement to claim input tax credit should not be affected by the selling dealer's actions. Any failure by the selling dealer to deposit VAT should be addressed by the Revenue, without impacting the purchaser dealer's right to claim input tax credit.

In conclusion, the Court dismissed the petitions as meritless, even after condoning the delay, as it would not adversely affect the respondent. The Court emphasized that the benefit of input tax credit should not be denied to the purchaser dealer based on the selling dealer's VAT deposit status, with any such issues to be handled separately by the Revenue.