2018 (9) TMI 2 - HC - VAT and Sales Tax

Whether the estimation done on the basis of the value shown in the Delivery Note is correct, especially when the Delivery Note discloses the value as stipulated by the Commissioner for payment of advance tax? - Held that - It is submitted that as per the Circular of the Commissioner it is mandated that Delivery Notes show the sale value of goods for the purpose of payment of advance tax. Even if the said contention is accepted, the assessee was obliged to produce the invoices showing the sales having been carried out at a lower price. There was absolutely no evidence produced before the Assessing Officer or the Appellate Authorities to substantiate such contention - the addition made on interstate purchase at the GP as computed by the Assessing Officer is sustained. Whether the Tribunal was justified in sustaining the estimation on the local purchases when there was not even a single evasion or undervaluation detected with respect to such local purchase and sales? - Held that - Though a explanation was put forth for reason of there being no substantiating evidence, we have declined deletion of addition with respect to interstate purchases; despite which it is to be noticed that the explanation was a plausible one - there being no evidence to indicate a suppression of local purchases, the addition made on that count is not proper - decided in favor of assessee. Denial of input tax credit - Held that - Input tax credit is a concession permitted to avoid the cascading effect in a value added tax regime. What is paid as tax at an earlier instance has to be set off in the later instance, wherein the taxation is only on the value addition - The State is deprived of the tax to that extent and hence there is no question of input tax credit. The assessee could definitely file a suit for recovery from the entity from whom they made the purchase. Having not received the tax at the first instance of sale, there is no obligation on the State to grant input tax credit - Decided in favor of Revenue. The revision is partly allowed.

Summary

Issues:
1. Estimation based on value in Delivery Note
2. Justification for estimation on local purchases
3. Denial of input tax claim

Estimation based on value in Delivery Note:
The case involved discrepancies between the purchases disclosed in returns and those found in Delivery Notes. The Tribunal estimated interstate purchases based on Delivery Note values, adding GP at 5.16%. The petitioner argued selling goods at lower prices, citing Commissioner's Circular on advance tax. However, no evidence supported this claim. The court upheld the addition on interstate purchases, rejecting the petitioner's argument due to lack of proof, ruling in favor of Revenue.

Justification for estimation on local purchases:
Regarding local purchases, no undervaluation was detected by the Assessing Officer during inspection. The discrepancy arose from variations in Delivery Notes and disclosed interstate purchases. Despite a plausible explanation, the addition on local purchases was deemed improper due to lack of evidence supporting suppression. The court directed deletion of the addition on local purchases, answering in favor of the assessee against the Revenue.

Denial of input tax claim:
The denial of input tax credit was contested based on registration cancellations post-purchases. The petitioner claimed purchases were made under valid registrations, blaming the Department for registering non-genuine dealers. However, input tax credit aims to prevent cascading tax effects. If the selling dealer fails to remit collected taxes, no input tax credit can be claimed. The State is deprived of tax in such cases, absolving the obligation to grant input tax credit. The court ruled in favor of the Revenue, stating no input tax credit can be claimed in such circumstances. The Assessing Officer was directed to redo the assessment as per the court's directions.