2014 (11) TMI 1027 - HC - VAT and Sales Tax

Entitlement to full claim of input tax credit (ITC) - whether the reversal of the claim of ITC was just and proper? - Held that - It is not in dispute that the goods in question were sold by the applicant to the manufacturer-exporters against Form-E. Sale of goods in question to manufacturer-exporters was exempted under Section 7(c) of the Act vide notification no. K.A.N.I.-2-247/XI-9(341)/09-U.P. Act-5-08-order (58)-2010. Bare reading of the provisions of Section 13(7) clearly reveals that the applicant was not entitled for the input tax credit with respect to the sale of goods exempted under Section 7(c) of the Act. Tribunal has considered the facts of the case and held that in view of the provisions of Section 13(7) of the Act, the applicant was not entitled for input tax credit. Thus the input tax credit was lawfully reversed by the Assessing Authority. Find no infirmity in the impugned order of the Tribunal. Decided in favour of the revenue.

Summary

Issues:
- Entitlement to full claim of input tax credit (ITC)
- Reversal of ITC claim

Entitlement to Full Claim of Input Tax Credit (ITC):
The case involved a dispute regarding the entitlement of the applicant to claim full input tax credit (ITC) for the assessment year 2010-11 (U.P.). The applicant, dealing in Mild Steel Pipe, had taken input tax credit of Rs. 6,42,260 on sales to manufacturer exporters exempted under Section 7(c) of the U.P. VAT Act 2008. The Assessing Authority reversed this credit citing Section 13(7) of the Act. The applicant contended that the ITC was lawfully taken and should not have been reversed, as the goods were sold to manufacturer-exporters for export out of India.

Reversal of ITC Claim:
The key legal provision in question was Section 13(7) of the U.P. VAT Act, 2008, which restricts the claiming of input tax credit in certain scenarios. The provision states that no credit of input tax shall be claimed if goods are sold in the course of export and are exempt from tax payment under Section 7(c). The Tribunal upheld the Assessing Authority's decision to reverse the ITC, concluding that the applicant was not entitled to claim the credit as per Section 13(7). The High Court concurred with this interpretation, stating that the applicant was not eligible for ITC on sales exempted under Section 7(c) of the Act.

In conclusion, the High Court dismissed the revision, holding that the input tax credit reversal by the Assessing Authority was lawful and in accordance with the provisions of the Act. The court found no error in the Tribunal's decision and ruled in favor of the revenue, rejecting the applicant's claim for full ITC.