2017 (1) TMI 1117 - HC - VAT and Sales Tax

Reversal of ITC - sales invoices - whether mere failure on the part of the selling dealers in reporting corresponding sales, can be the basis of reversing the ITC claimed by the petitioner? - Held that - The respondent, cannot reverse the ITC of a dealer, merely because, the selling dealer does not report the same. If, the Revenue find any discrepancy, it will have to be put to the petitioner and, only if, the purchasing dealer is unable to satisfy the Revenue, as regards the genuineness of the transaction, can any adverse orders be passed against the concerned dealer - reversal of credit not justified - petition allowed - decided in favor of assessee.

Summary

Issues:
Challenge to reversal of Input Tax Credit (ITC) on purchases due to non-filing of monthly returns by selling dealers.

Analysis:
1. The Writ Petition challenged an order that reversed the Input Tax Credit (ITC) on purchases from dealers who had not filed their monthly returns. The respondent imposed a tax liability of ?11,85,838/- along with a penalty of ?4,497 under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006.

2. The petitioner claimed to have made purchases from registered dealers, availed ITC in monthly returns, and utilized it against VAT/CST payable on sales within the State. The Enforcement Wing found discrepancies in the VAT paid by selling dealers, leading to notices for the assessment years 2011-12 to 2015-16.

3. The petitioner submitted all original invoices and proof of payment to the selling dealers. The petitioner argued that the failure of selling dealers to report corresponding sales should not be the basis for reversing the ITC claimed by the petitioner, citing relevant case laws to support this contention.

4. The judge found that the respondent had misdirected in law by reversing the ITC solely based on the non-reporting of sales by selling dealers. The judge emphasized that discrepancies should be addressed by giving the purchasing dealer an opportunity to clarify the genuineness of transactions before passing adverse orders.

5. The impugned order was set aside, allowing the respondent to redo the assessment after affording the petitioner a chance to present their case, considering the judgments cited in the petition. The Writ Petition was disposed of with no order as to costs.

This detailed analysis highlights the key arguments, findings, and conclusions of the judgment regarding the challenge to the reversal of Input Tax Credit on purchases due to non-filing of monthly returns by selling dealers.