2018 (2) TMI 199 - HC - VAT and Sales Tax

Reversal of Input tax credit - TNVAT Act - Held that - Honble Division Bench of this Court, in Sri Vinayaga Agencies v. Assistant Commissioner (CT), Vadapalani-1, Assessment Circle, Chennai and another 2013 (4) TMI 215 - MADRAS HIGH COURT , where it was held that All the revision orders revising the input tax credit on the admitted case of tax having been paid to the selling dealer, therefore, are found to be totally incorrect, erroneous and contrary to the provisions of the TNVAT Act and Rules - the revision petitioner, has not made out a case for reversal - revision dismissed.

Issues Involved:
1. Incorrect factual recording by the Tribunal.
2. Incorrect observation regarding the verification of TIN.
3. Irrelevance of Section 17.
4. Irrelevance of Section 19(19).
5. Inapplicability of the Suresh Trading Corporation decision.
6. Incorrect observation about self-assessment and ITC claim.
7. Irrelevance of decisions in Althaf Shoes and Srivinayaga Agencies.
8. Failure to examine the dealer's letter regarding TIN.

Detailed Analysis:

1. Incorrect Factual Recording by the Tribunal:
The Tribunal recorded that the seller was still active in the office of Assistant Commissioner (CT), Anna Salai-III Assessment Circle. However, the seller, Tvl. Insulation House, was a registered dealer in Chintadripet Assessment Circle, with registration canceled effective from 15.04.2011.

2. Incorrect Observation Regarding the Verification of TIN:
The Tribunal's observation that the Assessing Officer did not attempt to cross-verify the TIN of the seller, who is also an assessee in the same Assessment Circle, was deemed factually incorrect.

3. Irrelevance of Section 17:
Section 17, referred to by the Tribunal, was not relevant to the case as the discussion was about the reversal of ITC, not about any transaction liable to tax.

4. Irrelevance of Section 19(19):
Section 19(19) was also irrelevant as the dealer had not declared any closure of business.

5. Inapplicability of the Suresh Trading Corporation Decision:
The decision in Suresh Trading Corporation, which dealt with the Maharashtra Sales Tax Act, was not relevant to the TNVAT Act, 2006. Furthermore, it dealt with the cancellation of the seller's registration, which was not the issue at hand.

6. Incorrect Observation About Self-Assessment and ITC Claim:
The Tribunal's observation that self-assessment made in the case of the dealer itself is an establishing factor that the claim of ITC is correct was incorrect. ITC claimed under Section 19(16) is provisional and subject to modification at any time.

7. Irrelevance of Decisions in Althaf Shoes and Srivinayaga Agencies:
The decisions in Althaf Shoes and Srivinayaga Agencies were not relevant as they related to purchases from dealers whose registration had been canceled with retrospective effect.

8. Failure to Examine the Dealer's Letter Regarding TIN:
The Tribunal did not examine the dealer's letter dated 04.11.2011, which stated that the last 7 digits of the supplier's TIN were 0580586, and did not discuss how the dealers were dealing with a dealer whose TNGST number was 0580586, relating to some other dealer.

Tribunal's Findings:
The Tribunal held that the respondent dealers were assessed to tax on a total and taxable turnover under Section 22(2) of the Tamil Nadu Value Added Tax Act, 2006, on a self-assessment basis. The Assessing Officer denied the Input Tax Credit (ITC) claimed by the respondent on goods purchased from Tvl. Insulation House on the ground that the seller's registration number was invalid. However, the Tribunal found that the seller was a registered dealer with an active registration number during the disputed period. The Tribunal emphasized that the burden of proving that the transaction is not liable to tax lies on the assessee, and the dealer must prove that the transaction is not liable to tax under the provisions of the Act.

Legal Provisions and Precedents:
The Tribunal referred to Section 19(1) of the Tamil Nadu Value Added Tax Act, which allows a registered dealer to claim ITC if the tax due on such purchases has been paid by him in the prescribed manner. The Tribunal also cited the decisions of the Hon'ble High Court of Madras in Sri Vinayaga Agencies and Althaf Shoes, which held that the liability should be fastened on the selling dealer if the purchasing dealer has shown proof of payment of tax on purchases made.

Conclusion:
The Tribunal concluded that the respondent had claimed ITC based on valid tax invoices issued by the seller, who was a registered dealer. The revision of assessment made by the Assessing Officer without any basis was not correct. The order of the first appellate authority in setting aside the revision of assessment along with the levy of penalty was upheld. The Tax Case Revision was dismissed, and no costs were awarded. The court found no manifest error or grounds for judicial review under Article 226 of the Constitution of India.

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