2017 (3) TMI 52 - HC - VAT and Sales Tax

Reversal of Input Tax Credit - denial on the ground that the registration certificate of the dealers were cancelled with retrospective effect - Held that - on the date of purchase, the two dealers i.e., Jayram Dheva People Solutions and Sri Ganesh Enterprises had valid registration certificate - the decision in the case of The Assistant Commissioner (CT) Versus M/s. Bhairav Trading Company 2016 (9) TMI 1114 - MADRAS HIGH COURT relied upon, where it was held that whatever be the effect of retrospective cancellation upon the selling dealer, it can have no effect upon any person, who has acted upon the strength of a registration certificate, when such certificate was alive - liberty is given to the respondent to redo the assessment - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Challenge to the order reversing Input Tax Credit (ITC) availed by the petitioner.
2. Validity of reversing ITC based on cancelled registration certificates of dealers.
3. Impact of retrospective effect of cancellation on ITC reversal.
4. Applicability of relevant judgments on the impugned order.
5. Consideration of stand regarding valid registration certificates at the time of purchase.
6. Authority to redo assessment in accordance with the law.

Analysis:
1. The petitioner challenged the order dated 19.12.2016, where the respondent reversed the ITC availed by the petitioner for purchases made from three dealers. The ITC was reversed for Jayaram Dheva People Solutions, Sri Ganesh Enterprises, and V Shape Enterprises, Kanchipuram, totaling &8377; 4,84,561, with an additional penalty of &8377; 2,42,281 imposed by the respondent.

2. The petitioner argued that reversing ITC based on the cancellation of registration certificates of the dealers was flawed. The petitioner contended that the registration certificates of the two dealers were valid at the time of purchase, and the retrospective cancellation should not impact the ITC reversal. The petitioner relied on a judgment to support this argument.

3. The petitioner further argued that the retrospective effect of cancellation should not affect the ITC reversal, citing a specific judgment dated 01.09.2016. The petitioner emphasized that the cancellation with retrospective effect should not be a valid ground for reversing ITC.

4. Referring to relevant judgments, the petitioner relied on a Division Bench judgment dated 09.09.2016, to support the argument against the reversal of ITC for purchases made from V Shape Enterprises, Kanchipuram. The petitioner contended that this judgment should be considered in evaluating the impugned order.

5. The respondent, upon consideration of the judgments cited by the petitioner, conceded that the impugned order would need to be set aside. The court, after hearing both parties and reviewing the records, concluded that the impugned order cannot be sustained. The respondent was granted liberty to redo the assessment in compliance with the law, taking into account the judgments cited and addressing the petitioner's arguments regarding the validity of registration certificates at the time of purchase.

6. The court disposed of the writ petition, allowing the respondent to redo the assessment if necessary, ensuring it is done in accordance with the law. The court highlighted the importance of considering all relevant factors, including the validity of registration certificates and the necessity to address any non-payment of taxes by the dealer separately. The connected application was closed with no order as to costs.