2020 (7) TMI 672 - HC - VAT and Sales Tax

Reversal of Input Tax Credit - alleged mismatch between the particulars circulated by the petitioner and the particulars available in the selling/purchasers return of turnover - periods 2010-11 to 2015-16 - TNVAT Act - HELD THAT - This issue had been considered by this Court in M/s. JKM Graphics Solutions Private Limited V. Commercial Tax Officer 2017 (3) TMI 536 - MADRAS HIGH COURT and the Court had directed that a suitable central mechanism be evolved within the Department to delve into various aspects of mismatch. Pursuant thereto, a Circular was issued by the Commissioner bearing No.3 of 2019 (Q1/39643/2018 dated 18.01.2019), wherein at paragraph (c) the Commissioner directs the Authorities to keep assessments involving the issue of mismatch in abeyance, however issuing pre-assessment notices in time in order that the assessments are kept alive until such time the central mechanism is put in place. There is no justification for the Assessing Officer in the present matters to have finalized the assessments themselves, being clearly contrary to the directive of the Commissioner. Hence, the impugned orders of assessment are set aside. Petition allowed.

Summary

Issues: Impugned assessments under Tamil Nadu Value Added Tax Act, 2006 regarding reversal of Input Tax Credit (ITC) due to alleged mismatch between petitioner's particulars and selling/purchasers return of turnover.

Analysis:
1. The judgment addresses the impugned assessments passed under the Tamil Nadu Value Added Tax Act, 2006 for the periods 2010-11 to 2015-16. The primary issue revolves around the reversal of Input Tax Credit (ITC) availed by the petitioner due to an alleged mismatch between the particulars provided by the petitioner and those available in the selling/purchasers return of turnover.

2. Referring to a previous judgment in M/s. JKM Graphics Solutions Private Limited V. Commercial Tax Officer, the Court directed the evolution of a central mechanism within the Department to investigate issues of mismatch. Subsequently, a Circular issued by the Commissioner emphasized the need to keep assessments involving mismatch in abeyance until a suitable mechanism is established. The Circular outlined specific procedures to be followed in cases involving mismatch of ITC, emphasizing the importance of maintaining the issue until resolution.

3. The Court found that the Assessing Officer in the present matters had finalized the assessments themselves, which was deemed contrary to the directive of the Commissioner as per the Circular. Consequently, the impugned orders of assessment were set aside, and the show cause notice dated 26.08.2019 regarding the mismatch issue was to be kept alive in the petitioners' cases until a suitable mechanism, as directed by the Court, is formulated. Subsequent proceedings were to be initiated and finalized in accordance with the law once the central mechanism is in place.

4. As a result of the above findings, the Court allowed the Writ Petitions, setting aside the impugned orders of assessment and emphasizing the need to adhere to the directives outlined in the Circular. The judgment concluded by stating that no costs were to be imposed in this matter.

In conclusion, the judgment highlights the importance of following established directives and procedures, particularly in cases involving the reversal of Input Tax Credit due to mismatch issues, and emphasizes the need for a central mechanism to address such discrepancies effectively.