2015 (1) TMI 380 - HC - VAT and Sales Tax

Input Tax Credit - Allowability of tax credit on purchases made from M/s. Shree Bhavani Ispat - Registration of all the selling dealers was cancelled retrospectively Genuineness and bona fide of case Held that - Following the decision in MADHAV STEEL CORPORATION Versus STATE OF GUJARAT 2015 (1) TMI 233 - GUJARAT HIGH COURT - no error has been committed by the Tribunal in entering into the merits of the case and even considering the appeal/s on merits against the order of assessment passed by the Deputy Commissioner - when even considering the documents on record forming part of the paper book which have been relied upon by the learned advocate appearing on behalf of the appellant/s the appellant/s dealer/s have failed to prove the actual physical movement of the goods alleged to have been purchased from the vendors - when the respective appellant/s dealer/s have failed to establish and prove the aforesaid important aspect of actual physical movement of the goods alleged to have been purchased by them from M/s. Shree Bhavani Ispat and M/s. Mangal Enterprises and on which the input tax credit have been claimed the AO as well as the Tribunal have rightly rejected the claim of the respective appellant/s dealer/s of input tax credit claimed u/s 11. The appellant/s dealer/s have failed to satisfy / prove the actual physical movement of the goods alleged to have been purchased by them from the two vendors on which the input tax credit have been claimed and when the sale transactions are found to be not genuine and it appears that there were only billing activities no error has been committed by the AO as well as Tribunal in denying the input tax credit - it is not established and proved by the dealer that in fact there was movement of goods from its vendor M/s. Shree Bhavani Ispat Bhavnagar - no error has been committed in holding that the activities by the selling dealer vendor were the billing activities only and there was no selling deals - when there was no movement of goods and it was only billing activities the input credit claimed on such transactions is rightly disallowed Decided against assessee.

Summary

Issues Involved:
1. Denial of tax credit due to retrospective cancellation of the selling dealer's registration.
2. Application of general observations by the Tribunal without considering individual cases.
3. Justification of remanding the matter on the issue of penalty while disallowing tax credit appeals.

Detailed Analysis:

Issue 1: Denial of Tax Credit Due to Retrospective Cancellation of Registration
The primary issue revolves around whether the Tribunal was correct in denying tax credit on purchases from M/s. Shree Bhavani Ispat, whose registration was cancelled retrospectively. The Tribunal, along with the Assessing Officer, denied the input credit on the grounds that the selling dealers were involved only in billing activities without genuine transactions of sale and purchase. The Gujarat High Court upheld this decision, emphasizing that the appellant failed to prove the actual physical movement of goods. The Court referenced the case of M/s. Madhav Steel Corporation, where similar facts led to the disallowance of input tax credit. The Court reiterated that the onus to prove the genuineness of the purchase, including the physical movement of goods, lies on the assessee. The appellant's inability to demonstrate this physical movement resulted in the confirmation of the disallowance of input tax credit.

Issue 2: Application of General Observations Without Considering Individual Cases
The appellant contended that the Tribunal applied its general observations from previous cases without considering the specific facts and bona fides of the individual case. The High Court noted that the Tribunal had relied on its decision in M/s. Madhav Steel Corporation, which was subsequently upheld by the High Court. The Tribunal's approach was deemed appropriate as the appellant had failed to provide evidence of genuine transactions. The High Court emphasized that even if the selling dealer's registration was valid at the time of purchase, the absence of proof of physical movement of goods substantiated the Tribunal's decision to deny the tax credit.

Issue 3: Justification of Remanding the Matter on Penalty While Disallowing Tax Credit Appeals
The Tribunal had remanded the matter regarding the imposition of penalties, observing that the highest penalty was imposed without exercising discretion. The High Court supported this remand, noting that the Tribunal had appropriately identified the need for the Assessing Officer to reconsider the penalties. The High Court found no error in the Tribunal's decision to disallow the tax credit while remanding the penalty issue, as the appellant failed to prove the genuineness of the transactions.

Conclusion:
The High Court dismissed the tax appeal, confirming that the Tribunal and Assessing Officer rightly denied the input tax credit due to the lack of evidence of genuine transactions and physical movement of goods. The Tribunal's reliance on previous judgments and its decision to remand the penalty issue were upheld, reinforcing the principle that the onus to prove the genuineness of transactions lies with the assessee.