2019 (12) TMI 173 - HC - VAT and Sales Tax

Validity of reassessment order - disallowance of input tax credit - Section 39 1 of Karnataka VAT Act - contention of the petitioner is that input tax credit claimed by the petitioner has been denied by the respondent-Authority mainly on the ground that the selling dealer - HELD THAT - The selling dealer M/s. Total Scaffolding Technologies was registered on 29.06.2013 and de-registered on 10.08.2015 i.e., during the tax periods in question, the said selling dealer was a registered dealer. It is well-settled that as long as the dealer is registered under the provisions of the Act, the transactions made by the purchasing dealer cannot be suspected. It is on the registration of the selling dealer, transaction has been effected and in such circumstances, the prescribed authority rejecting the claim of the input tax credit mainly on the ground that M/s. Total Scaffolding Technologies was a de-registered dealer during the relevant periods cannot be accepted. The petitioner placed certain documents on record to establish the factum of tax discharged by him through cheques qua the invoices. These aspects require to be examined by the prescribed authority while considering the claim of the petitioner regarding the input tax credit. The proceedings are restored to the file of the respondent-prescribed Authority to reconsider the matter in accordance with law, considering the relevant documents placed on record - Petition allowed by way of remand.

Summary

Issues:
Challenge to reassessment order under Karnataka Value Added Tax Act, 2003 for tax periods 2014-15, disallowance of input tax credit, rejection of rectification application.

Analysis:
The petitioner, a private limited company engaged in civil works, challenged the reassessment order by the respondent-Authority under the Karnataka Value Added Tax Act, 2003 for the tax periods 2014-15. The issue primarily revolved around the disallowance of input tax credit and the rejection of the rectification application by the petitioner. The respondent-Authority concluded the reassessment proceedings under Section 39[1] of the Act and rejected the rectification application submitted by the petitioner.

The petitioner contended that the input tax credit claimed was denied mainly due to the selling dealer being de-registered and not filing monthly returns or discharging taxes during the relevant tax periods. The petitioner argued that the selling dealer was registered during the relevant periods, supported by documents showing registration and de-registration dates. The petitioner emphasized that the tax payment was made and substantiated through bank statements, which the prescribed authority failed to appreciate.

The Additional Government Advocate supported the impugned order, stating that there was no proof on record to establish the tax payment made by the petitioner. It was argued that without the selling dealer paying the collected tax, the petitioner could not claim input tax credit. However, upon hearing both parties and examining the evidence, the Court found that the selling dealer was registered during the relevant tax periods. The Court emphasized that transactions made by the purchasing dealer should not be doubted as long as the selling dealer was registered. The Court directed the prescribed authority to reconsider the matter, taking into account the documents provided by the petitioner to establish tax payments through cheques.

Consequently, the reassessment order, demand notices, and endorsement were set aside, with proceedings restored to the respondent-prescribed Authority for reconsideration in line with the law. The petitioner was instructed to appear before the prescribed authority without further notice. The respondent-Authority was directed to conclude the reassessment proceedings promptly and in accordance with the law. The writ petition was disposed of accordingly.