2021 (12) TMI 615 - HC - VAT and Sales Tax

Input tax credit - purchases made by the petitioner only after the date of cancellation of the registration - alternative remedy of appeal as per Section 51 of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT - The facts on records indicate that the purchases were made by the petitioner long after the cancellation of the registration of Front Line Polymers on 04.01.2017 and one day after the cancellation of registration of Sri Kannan Chemicals on 22.07.2016. Therefore, there is no merits in this writ petition and it is liable to be dismissed. The petitioner is allowed to exercise the alternate remedy by filing a statutory appeal before the Appellate Commissioner within a period of 30 days from the date of receipt of copy of this order, subject to the petitioner depositing 25% of the disputed tax along with the appeal.

Summary

Issues:
1. Challenge to assessment order dated 03.08.2020 in TIN:33270483294/2016-17 under TNVAT Act.
2. Claim of input tax credit reversed due to purchases from cancelled dealers.
3. Petitioner's contention of being a bona-fide purchaser and entitlement to input tax credit.
4. Respondent's argument against the sustainability of the impugned order.
5. Availability of alternate remedy through appeal before the Appellate Commissioner.
6. Allegation of fraudulent activities by some dealers.
7. Interpretation of the Supreme Court decision in State of Maharastra Vs. Suresh Trading Company.

Analysis:
1. The writ petition challenged the assessment order dated 03.08.2020 under TNVAT Act, regarding purchases made from cancelled dealers. The order proposed the reversal of input tax credit due to purchases from Frontline Polymers and Sri Kannan Chemicals, totaling ?86,43,000 at 5% tax, resulting in a reversal of ?4,32,150.
2. The petitioner contended that as a bona-fide purchaser, they were entitled to input tax credit under Section 19 of the Act, citing the Supreme Court decision in State of Maharastra Vs. Suresh Trading Company. The purchases were made through normal banking channels, and the cancellations of the dealers' registrations were retrospective, long after the purchases.
3. The respondent argued against the sustainability of the impugned order, stating the petitioner cannot claim to be a bona-fide purchaser as the purchases were made after the cancellation dates. The respondent highlighted the availability of an alternate remedy through an appeal before the Appellate Commissioner under Section 51 of the Act.
4. Allegations of fraudulent activities by some dealers were raised, indicating a pattern of fraudulent input tax credit claims. The respondent emphasized the need for strict action under Article 226 of the Constitution of India.
5. The Court noted that the purchases were made after the cancellation dates of the dealers, dismissing the writ petition. However, the petitioner was allowed to exercise the alternate remedy of filing a statutory appeal before the Appellate Commissioner within 30 days, upon depositing 25% of the disputed tax along with the appeal.
6. The Court distinguished the Supreme Court decision cited by the petitioner, emphasizing the specific facts of the case. The judgment disposed of the writ petition with the option for the petitioner to pursue the appeal route. The connected writ miscellaneous petition was also closed, with no order as to costs.