2019 (2) TMI 432 - HC - VAT and Sales Tax

Input tax credit - applicability of provisions of Section 8 of U.P. Value Added Tax Act - Held that - In the first place, to invoke the provision of Rule 21 (3) of the Rules, normally, the enquiry required to be conducted is only viz-a-viz the seller who may have sold the goods to the assessee claiming ITC against a tax invoice. Once such transaction is found to be genuine and goods established to have been sold, no further enquiry may be required to be made. To that extent the submission of learned counsel appearing for the assessee is correct. However in the facts of the present case, it does appear that other than relying on the enquiry made with respect to the first selling dealer, the revenue authorities also referred to certain other enquiries made from the seller from whom the assessee made the purchases - though normally the Court may have remanded the matter to the assessing authority to pass a fresh order in accordance with law after allowing the assessee an opportunity to rebut the evidence relied upon by the revenue, however, in view of the fact that the present proceedings have arisen from the provisional assessment proceedings and it has been stated at the bar that the final assessment proceedings have not yet been concluded, the present revisions are disposed of with a direction that it shall remain open to the assessing authority to confront the assessee with all adverse material that may have been collected by the revenue authorities with respect to ITC claimed by the assessee, in those proceedings and to accordingly pass an assessment order in accordance with law. Petition disposed off.

Summary

Issues:
1. Revisions filed by revenue against Tribunal's common order for provisional assessment proceedings.
2. Question of law regarding granting input tax credit (ITC) under U.P. Value Added Tax Act.
3. Disputed ITC claims based on purchases from various sellers.
4. Tribunal's decision to allow ITC benefits to the assessee.
5. Arguments regarding genuineness of transactions and evidence considered.
6. Consideration of Rule 21(3) of U.P. Value Added Tax Rules, 2008.
7. Lack of opportunity for assessee to rebut adverse material during assessment proceedings.
8. Disposal of revisions with directions for assessing authority in provisional assessment proceedings.

Analysis:
The High Court of Allahabad dealt with a batch of revisions filed by the revenue challenging a common order of the Tribunal related to provisional assessment proceedings against the assessee for the months of April to August 2016. The primary question raised was whether the Tribunal was justified in granting input tax credit (ITC) against the provisions of Section 8 of U.P. Value Added Tax Act for the assessment year 2016-17 (April). The assessee, engaged in trading leather and shoe material, had claimed ITC based on purchases from several sellers, which were rejected by the assessing authority citing non-genuine transactions. The Tribunal, however, allowed the appeals and granted ITC benefits to the assessee, emphasizing that while doubts existed about the sellers, the sales to the assessee were valid.

The revenue contended that as per Rule 21(3) of U.P. Value Added Tax Rules, 2008, the ITC claimed should be disallowed since the transactions were deemed as paper transactions without actual goods being purchased. The revenue argued that the sellers were non-existent, making the transactions sham. On the other hand, the assessee's counsel argued that the genuineness of the transactions should be assessed based on the actual sellers from whom the purchases were made, and if those transactions were genuine, ITC could not be disallowed.

The Court noted that while the primary focus should be on the seller from whom goods were purchased, in this case, the revenue authorities had relied on ex-parte enquiries and disputed transactions without giving the assessee an opportunity to rebut the evidence. Consequently, the Court directed the assessing authority to confront the assessee with all adverse material collected during the proceedings and pass an assessment order in accordance with law, considering the lack of proper examination of evidence during provisional assessment proceedings.

In conclusion, the Court disposed of the revisions with instructions for the assessing authority to conduct a fair assessment in the provisional proceedings, allowing the assessee to address any adverse material presented by the revenue. The Court emphasized the importance of providing the assessee with a chance to respond to evidence before making a final decision on the ITC claims, ensuring a just and transparent assessment process.