2017 (4) TMI 877 - HC - VAT and Sales Tax

Cancellation of registration certificate - assessee had wrongly claimed benefit of I.T.C., showing purchase of goods from M/s Shree Krishna Builders & Developers, Chandpur, Bijnor, whereas no such sale was made by the concerned developer - whether wrongful claim of I.T.C is sufficient ground for cancellation of registration certificate? - Held that - In case claim of I.T.C. is found to be false or incorrect, then it can be reversed by invoking jurisdiction under Section 14 of the Act - By virtue of proviso to Section 14, the assessee would only be liable to pay interest at a rate of 15% per annum - The Act does not contemplate that if claim of I.T.C. is reversed the registration of a dealer could be cancelled in addition to reversal of ITC - revision allowed - decided in favor of assessee.

Summary

Issues:
Cancellation of registration as a dealer based on wrongful claim of Input Tax Credit (I.T.C.)

Analysis:
The judgment revolves around the cancellation of the registration of a dealer under Section 17 (11) of the U.P. Value Added Tax Act due to the alleged wrongful claim of Input Tax Credit (I.T.C.). The authorities canceled the registration citing that the dealer wrongly claimed I.T.C. by showing purchases from a specific developer, which the developer denied. The I.T.C. benefit was reversed, and the registration certificate was canceled after a hearing, a decision upheld by the Tribunal.

The applicant argued that a wrongful I.T.C. claim should not lead to registration cancellation but only I.T.C. reversal. On the other hand, the Standing Counsel contended that the jurisdiction was rightly invoked under Section 17 (11) (ix) and no interference was necessary. The Court noted that the sole ground for cancellation was the alleged wrongful I.T.C. claim, which could be reversed under Section 14 of the Act. The Act does not provide for registration cancellation solely based on I.T.C. claims.

The Court highlighted Section 14, which deals with Reverse Input Tax Credit and the consequences of false I.T.C. claims. It emphasized that the Act does not authorize registration cancellation for I.T.C. errors, as the power to cancel registration is specified under Section 17 (11) for specific reasons, none of which include incorrect I.T.C. claims. The term "sufficient cause" in Section 17 (11) (ix) must align with other grounds listed, following ejusdem generis principles.

The judgment emphasized that cancellation of registration is a severe measure requiring justifiable causes as per the law. In this case, the denial of sales by the developer should result in I.T.C. reversal, not registration cancellation. The Court noted that the developer later revised its return to reflect the sales to the dealer. Consequently, the Court held that canceling the registration based on the I.T.C. claim was invalid, and the revision was allowed.