2023 (7) TMI 104 - HC - VAT and Sales Tax

Reversal of input tax credit against the supply - purchase of materials from a dealer whose registration has been cancelled - basis of the cancellation of registration of the selling dealer, not provided to appellant - violation of principles of natural justice - HELD THAT - Admittedly, the details of such cancellation has not been furnished to the appellant. In any event, the appellant having availed the input tax credit against the inward supply cannot be directed to reverse the input tax credit by way of an email communication without mentioning as to what was the basis of the cancellation of registration of the selling dealer. There are no need to travel far to examine the correctness of the direction issued by the respondent department to the appellant, without furnishing any details to the appellant, the respondent could not have directed reversal of the input tax credit, which was availed by the appellant and it is informed that the appellant was compelled to pay the amount and without prejudice to their rights have paid the amount - the procedure adopted by the authority for directing reversal of the input tax credit and thereafter compelling the appellants to pay the amount is not sustainable in the eye of law but will be in violation of the principles of natural justice. Communication sent by the authority by an email dated 20th December, 2022 is set aside with a direction to the authority to remit the amount of input tax credit which was reversed by the appellant on effecting payment without prejudice to their right by transmitting the same amount in the appellants electronic credit ledger - Petition allowed.

Summary

Issues Involved:
The judgment involves the consideration of whether the respondent department could direct the appellant/assessee to reverse the input tax credit without providing details of the cancellation of the selling dealer's registration.

Summary:
The High Court of Calcutta, comprising Justice T. S. Sivagnanam and Justice Hiranmay Bhattacharyya, heard an intra-Court appeal challenging an order that declined to grant interim relief but directed affidavits to be filed. The appellant contested the order, arguing that the respondent department had directed them to reverse input tax credit without providing details of the cancellation of the selling dealer's registration. The Court observed that such a directive without furnishing relevant details to the appellant was not tenable in law and violated principles of natural justice. The Court allowed both the appeal and the writ petition, setting aside the communication from the authority and directing the authority to remit the reversed input tax credit amount to the appellant's electronic credit ledger within 10 days. The judgment emphasized that the respondent department could initiate appropriate action in accordance with the law if necessary. No costs were awarded, and a certified copy of the order would be provided to the parties upon request.

This judgment highlighted the importance of procedural fairness and the need for authorities to provide sufficient details when directing actions that impact parties' rights, particularly in matters concerning tax credits and registrations.