2021 (2) TMI 1037 - HC - VAT / Sales Tax

Input Tax Credit - denial of ITC in the hands of purchasing dealer or recovery from the seller for failure to deposit the tax - Section 19(1) of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT - The State had preferred an appeal in THE ASSISTANT COMMISSIONER (CT) CHENNAI VERSUS SRI. VINAYAGA AGENCIES 2020 (4) TMI 141 - MADRAS HIGH COURT has dismissed the writ appeal, holding that respondent are directed to allow the ITC in the hands of purchasing dealer under Section 19(1) of the Act. Appeal dismissed - decided against appellant.

Summary

Issues: Appeal against order setting aside assessment and allowing Input Tax Credit (ITC) - Interpretation of Section 19(1) of the Act - Liability of selling dealer for non-deposit of tax collected from purchasing dealer.

Analysis:
The appeal before the High Court was against a common order setting aside the assessment and allowing the Input Tax Credit (ITC) to the respondent. The Division Bench of the Court had dismissed the writ appeal filed by the State, upholding the decision to permit the respondent to avail the ITC. The Division Bench's judgment emphasized the legal position regarding Section 19(1) of the Act, specifically focusing on the period before the amendment of the proviso in 2016. The judgment highlighted that the purchasing dealer had established payment of tax on purchases, as required by the law before the 2016 amendment. It was noted that denying ITC to the purchasing dealer was not justified in the present case, and the Revenue authorities were free to proceed against the selling dealer for the tax collected but not deposited by the purchasing dealer.

The Division Bench clarified that the selling dealer held the tax collected in trust for the State, and the Revenue could conduct an inquiry against the selling dealer to recover the tax amount. The judgment emphasized that the selling dealer's identity and registration were established, and there was no dispute regarding the tax collection from the purchasing dealer. Therefore, the Division Bench concluded that the learned Single Judge was correct in allowing the writ petition and directing the respondent to permit the ITC in the hands of the purchasing dealer under Section 19(1) of the Act.

As a result of the Division Bench's decision upholding the common order, the High Court dismissed the present writ appeal, following the precedent set by the Division Bench. The judgment reiterated that the impugned order would enure in favor of the respondent, leading to the dismissal of the appeal. No costs were awarded in the matter, and the connected miscellaneous petition was closed accordingly.