2017 (2) TMI 1132 - HC - VAT and Sales Tax

Interpretation of statute - Section 9(2)(g) of of DVAT Act - The input credit claims were disallowed by the VATO with the rationale that the firm s registrations had been cancelled and default assessment of tax and interest under Section 32 of the Act were completed - Held that - The proviso creates an exception where tax is deferred or deferrable under any Package Scheme of Incentives implemented by the State Government. In that event a deeming fiction is created by the proviso under which the tax is deemed to have been received in the Government treasury for the purposes of the subsection. In all other cases an actual deposit of taxes is mandated before a set off is allowed - In the present case the VAT Act is silent; Section 9(2) (g) was introduced only with effect from 1-4-2010 - Section 9(1) which grants input credit to purchasing dealers to an extent is controlled by Section 9(2) that lists specific situations where benefit can be denied - appeal dismissed - decided against Revenue.

Summary

Issues:
Challenge to Tribunal's order interpreting Section 9(2)(g) of the Delhi VAT Act for assessment periods 2007-08.

Analysis:
The appellant, a registered dealer, claimed input tax credit on purchases made against tax invoices issued by two selling dealers, which were disallowed by the VATO due to cancelled registrations and default assessment of tax and interest. The appellant's appeal was rejected by the Objection Hearing Authority (OHA), leading to the approach to the VAT Tribunal.

The Tribunal, following the decision in Shanti Kiran India Pvt. Ltd. v. Commissioner Trade and Tax Department, held that tax credit cannot be denied if claimed in accordance with Section 9(1) of the Act. The Tribunal emphasized that the purchasing dealer cannot be denied benefits based on the selling dealer's transactions unless collusion is proven. The Tribunal also highlighted the restrictive nature of Section 9(2) and the absence of conditions like those in clause (g) before 2010.

This Court noted that Section 9(1) granting input credit to purchasing dealers is controlled by Section 9(2), which lists specific situations where benefits can be denied. The Court disagreed with the interpretation that input credit is granted only to the extent tax is deposited by the selling dealer, as it places an onerous burden on the purchasing dealer without clear statutory provisions. The Court also rejected the view that clause (g) in Section 9(2) is clarificatory, emphasizing its exception to the general rule.

The Court distinguished the Bombay High Court judgment in M/S.Mahalaxmi Cotton Ginning, which dealt with the Constitutionality of a local VAT law provision. The Court highlighted the mandatory nature of the provision requiring tax to be physically deposited into the treasury for set off claims. The Court concluded that the Bombay High Court decision is not relevant to the present case due to the silence of the VAT Act on Section 9(2)(g) before 2010.

Based on the settled law in Shanti Kiran, the Court dismissed the appeal, stating that the question of law sought to be urged does not arise. The judgment reaffirmed the interpretation of Section 9(2) and upheld the Tribunal's decision, leading to the dismissal of the appeal and pending applications.